What Impact Does the Fed's Raising the Interest Rate Have

Multiple Choice

What impact does the Fed's raising the interest rate have on the money supply and on the price level?

A) An increase in interest rates raises the money supply and eventually reduces prices.
B) An increase in interest rates reduces the money demand which will slow the growth in prices.
C) An increase in interest rates lowers the money supply and raises the money demand, which will neutralize price increases.
D) An increase in interest rates will increase investment spending and GDP, which will lower prices.