A) an interest rate is the "price" of money, similar to how a wage is the "price" of labor. If the Federal Reserve reduces the supply for money, what happens to the interest rate? Graph a supply and demand function showing both equilibria of the quantity of money & the price of money (the interest rate)before and after the FED reduces money supply.

B) Based on your findings for part A, how might this change in interest rates and the supply of money affect the value of money? What happens in the circular-flow-diagram if borrowing money becomes expensive for businesses and consumers?