What happened when the Federal Reserve limited the money supply? The slow release of money kept the value of the US dollar high.
The limited access to currency stifled business growth. The value of stocks slowly recovered with the tight-fisted policy. More money went into business rather than into the stock market.
The correct answer is: " The limited access to currency stifled business growth"
When the money supply is limited by the Fed, it means that the amount of money in circulation in the economy becomes smaller. Threfore, there is a relative scarcity that leads to the increase of the amount charged for a loan, the interest rate.
<u>High interest rates discourage firms from undertaking investment projects with borrowed money</u>, as their rentability needs to be very high to compensate for the large amounts to be paid for the funds. Therefore, business growth is stifled due to the increase in the price of money.
"The slow release of money kept the value of the US dollar high" is the best option from the list, although it should be noted that there were negative consequences as well. <span />
