If the quantity of money increases, the
A) AD curve shifts rightward and aggregate demand increases.
B) price level rises and the AD curve does not shift.
C) AD curve does not shift and there is a movement upward along the curve.
D) AD curve shifts leftward and aggregate demand decreases.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, an increase in the money supply leads to an increase in aggregate demand, causing the AD curve to shift rightward. This is because the increase in the money supply leads to an increase in consumer and business spending, which in turn leads to an increase in demand for goods and services.

If the Quantity of Money Increases, the