39 The business sector will be affected by a contraction in the money supply because
a. Interest rates will tend to fall, thus reducing business costs
b. Consumers credit will contract thus reducing consumers demand
c. The exchange rate will fall making business more internationally competitive
d. Inflation will fall and thus demand in the economy will expand
Economics - Financial Markets
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@uri hii mate any idea about the question?
decreasing the money supply increases the interest rates which means their is less consumption and more saving MPS increases MPC decreases leakage is more.
it cannot be A, it cannot be D too...im confused between c and b, i guess its B because higher interest rates mean consumer would be less willing to obtain loans because of higher interest hence reducing consumers demand
even i think B is the answer
when interest rates increase exchange rates also rises! so it can't be C