Expansion of the money supply by the central bank should lower interest rates provided the demand for money does not fall; if the demand for money does decline, interest rates will rise.

Question

Quizplus · Accepted Answer

Expansion of the money supply by the central bank typically lowers interest rates because more money available means banks can lend more easily at lower rates. If the demand for money declines, it doesn't automatically lead to higher interest rates; it could further lower them since less demand for money means less competition for borrowing, potentially pushing rates down further.

Expansion of the Money Supply by the Central Bank Should