For each item below, which would tend to cause interest rates to increase, and which would cause them to decrease? The Federal Reserve (a) increases the growth in the money supply, or (b) reduces the money supply. ANS: The economy enters a (a) period of greater productivity, or (b) recession. - ANS: The rate of inflation (a) increases, or (b) decreases. - ANS: The federal budget deficit (a) increases, or (b) decreases. ANS