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If the Economy Is Currently in Monetary Equilibrium, an Increase

Question 18

Multiple Choice

If the economy is currently in monetary equilibrium, an increase in the money supply will


A) cause an excess demand for money and a decrease in the rate of interest.
B) cause a reduction in the demand for money, leading to a higher rate of interest.
C) not change the equilibrium conditions.
D) lead to a movement down the money demand curve to a lower rate of interest.
E) cause an increase in the demand for money, leading to a lower rate of interest.

Correct Answer:

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