According to monetarist theory, an increase in the money supply will change aggregate spending because people and firms rebalance their portfolios.

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Monetarist theory suggests that an increase in the money supply will lead to individuals and firms rebalancing their portfolios by buying more goods and services, thereby increasing aggregate spending. This is based on the idea that money is a driving force behind economic activity and that changes in the money supply can have a significant impact on overall economic activity.

According to Monetarist Theory, an Increase in the Money Supply