An increase in the money supply leads to a(n):
A)decline in interest rates,an increase in investment,and an increase in aggregate demand.
B)decline in interest rates,a decrease in investment,and an increase in aggregate demand.
C)decline in interest rates,an increase in investment,and a decline in aggregate demand.
D)increase in interest rates,an increase in investment,and an increase in aggregate demand.
E)decline in interest rates,a decline in investment,and a decline in aggregate demand.

Question

Quizplus · Accepted Answer

According to the theory of monetary policy, an increase in the money supply leads to a decline in interest rates, as there is now more money available for borrowing. With lower interest rates, businesses are more likely to invest in projects, leading to an increase in investment. The increase in investment stimulates economic growth, leading to an increase in aggregate demand. Therefore, choice A is the best answer.

An Increase in the Money Supply Leads to A(n)