All else constant, an increase in the supply of money will lead to _______ in the equilibrium quantity of money and _______ in the equilibrium price of bonds.

Question

Quizplus · Accepted Answer

If the supply of money increases, there will be more money in the market, increasing the equilibrium quantity of money. This increased supply of money will decrease the demand for bonds, leading to a decrease in the equilibrium price of bonds. Therefore, an increase in supply of money will lead to an increase in equilibrium quantity of money and a decrease in equilibrium price of bonds.

All Else Constant, an Increase in the Supply of Money