Question

The Federal Reserve has a number of ways to influence the supply of money. The Federal Reserve can influence the interest rate that people pay on their loans, regardless of what bank they are using. How might the Fed adjust the interest rate if it wanted to increase the amount of money in circulation?

A. Decrease the interest rate. People would be less likely to take out loans.

B. Increase the interest rate. People would be more likely to take out loans.

C. Increase the interest rate. People would be less likely to take out loans.

D. Decrease the interest rate. People would be more likely to take out loans.

Is the answer A.?

Answer 1

You are correct.

Answer 2

I disagree. People are more likely to take out loans if they get a low interest rate.