If the Reserve Bank increases the quantity of money, then
A) the quantity of real GDP demanded decreases and there is a movement up along the AD curve.
B) the quantity of real GDP demanded increases and there is a movement down along the AD curve.
C) both the aggregate demand curve and the aggregate supply curve shift leftward.
D) aggregate demand decreases and the AD curve shifts leftward.
E) aggregate demand increases and the AD curve shifts rightward.

Question

Quizplus · Accepted Answer

Increasing the quantity of money typically lowers interest rates, which encourages more spending and investment, thus increasing aggregate demand and shifting the AD curve to the right.

If the Reserve Bank Increases the Quantity of Money, Then