By altering people's liquidity, an increase in the money supply relative to the demand for liquidity should lead to

Question

Quizplus · Accepted Answer

When people's liquidity is altered by an increase in the money supply relative to the demand for liquidity, it gives them more disposable income to spend. This increased liquidity induces people to spend more, either on real assets like homes, cars, and appliances or on financial assets like stocks, bonds, and savings accounts. Hence, an increase in the money supply relative to the demand for liquidity should lead to more spending on either real assets or financial assets. Therefore, option B is the best choice.

By Altering People's Liquidity, an Increase in the Money Supply