The Effect of a Decline in the Money Supply on the Economy

Multiple Choice

The effect of a decline in the money supply on the economy differs from the effect of a decline in the willingness of banks to lend in that a decline in the money supply will lead to

A) a decline in output, whereas a decline in the willingness of banks to lend will lead to an increase in output.
B) an increase in the price level, whereas a decline in the willingness of banks to lend will lead to a decrease in the price level.
C) an increase in the real interest rate, whereas a decline in the willingness of banks to lend will lead to a decrease in the real interest rate.
D) a decrease in the price level, whereas a decline in the willingness of banks to lend will lead to an increase in the price level.