An increase in the money supply will reduce interest rates and increase the price of bonds.

Question

Quizplus · Accepted Answer

An increase in the money supply means there is more money available for lending, which leads to more competition among borrowers and results in lower interest rates. When interest rates are lower, the demand for bonds increases, causing their prices to rise. Therefore, an increase in the money supply will reduce interest rates and increase bond prices.

An Increase in the Money Supply Will Reduce Interest Rates