As part of the "wealth channel of monetary policy," a higher money supply __________ bond prices and thus __________ spending.
A) raises; raises consumption
B) raises; raises investment
C) lowers; lowers consumption
D) lowers; lowers investment

Question

Quizplus · Accepted Answer

A higher money supply typically leads to lower interest rates, which raises bond prices. Higher bond prices increase wealth, leading to higher consumption.

As Part of the "Wealth Channel of Monetary Policy," a Higher