If the demand curve for money were horizontal at some interest rate, an increase in the money supply
A) would lower the interest rate.
B) would increase the rate of inflation.
C) would be highly effective in reducing inflation.
D) would not change the interest rate.

Question

Quizplus · Accepted Answer

A horizontal demand curve for money implies that the interest rate is fixed and does not change with changes in the money supply. Therefore, an increase in the money supply would not change the interest rate.

If the Demand Curve for Money Were Horizontal at Some