What will an increase in the money supply typically do?
A)Increase the interest rate
B)Decrease the interest rate
C)Increase aggregate demand
D)Both B and C

Question

Quizplus · Accepted Answer

An increase in the money supply will typically decrease the interest rate and increase aggregate demand.
Key Takeaway: When investment spending increases, the AD will always increase and the real GDP will also rise. The Fed increases the money supply by purchasing bonds and other government securities, increasing bank reserves, and therefore increasing the money supply.

What Will an Increase in the Money Supply Typically Do