In the money sector, other things being the same, an increase in the supply of money will cause

Question

Quizplus · Accepted Answer

An increase in the supply of money by the central bank will lead to a decrease in interest rates as more money will be available in the market to lend or borrow, and this excess supply of money will lower the cost of borrowing. As interest rates decrease, bond prices will increase, and stock values may also increase as investors shift from bonds to stocks in search of higher returns. Hence, options A, C, and D are incorrect. Therefore, the correct answer is B.

In the Money Sector, Other Things Being the Same, an Increase