In Figure 15.4,an increase in the money supply from $100 billion to $135 billion will cause a

Question

Quizplus · Accepted Answer

An increase in the money supply will lower the interest rate, making borrowing cheaper and encouraging investment and consumption. This will lead to an increase in aggregate demand, rather than a decrease. The money demand curve may shift, but this is not necessarily a direct result of the increase in the money supply. Therefore, option B is the correct answer.