An increase in the money supply, ceteris paribus, usually
A) increases the interest rate and increases aggregate demand.
B) increases the interest rate and decreases aggregate demand.
C) decreases the interest rate and increases aggregate demand.
D) decreases the interest rate and decreases aggregate demand.

Question

Quizplus · Accepted Answer

An increase in the money supply will decrease the interest rate because there will be more money available to borrow, leading to an increase in borrowing and spending, thus increasing aggregate demand.

An Increase in the Money Supply, Ceteris Paribus, Usually