Say the Federal Reserve wanted to increase the money supply in order to lower interest rates in order to stimulate the economy so that unemployment will be reduced. What are the negative effects of this situation?
Isn't it true that when interest rates are low people are more likely to hold onto there money which results in banks having a larger reserve? So even if the money supply increases if people are less likely to spend money it won't increase economic growth.
Isn't it true that when interest rates are low people are more likely to hold onto there money which results in banks having a larger reserve? So even if the money supply increases if people are less likely to spend money it won't increase economic growth.