If the Fed Decreases Money Supply

question 4

Multiple Choice

If the Fed decreases money supply,

• A) the IS curve will shift to the right.
• B) the IS curve will shift to the left.
• C) the LM curve will shift to the right.
• D) the LM curve will shift to the left.

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Definitions:

Bond Interest Expense

The cost incurred by an issuer of bonds due to the periodic interest payments made to bondholders.

Amortization

The process of gradually writing off the initial cost of an intangible asset over its useful life, reflecting its consumption or decline in value.

Bond Premium

The excess of a bond's market price over its nominal value.

Market Rate

The prevailing interest rate available in the marketplace for loans or investments of similar risk and maturity.