An increase in the supply of money will:
A) reduce the rate of interest and, thereby, trigger an increase in current spending by households and businesses.
B) reduce aggregate demand and real output.
C) increase only the general level of prices.
D) lead to a higher rate of unemployment.

Question

Quizplus · Accepted Answer

An increase in the supply of money will decrease the rate of interest, as there will be more money available for lending. This will encourage households and businesses to borrow and spend more, increasing current spending and stimulating the economy.

An Increase in the Supply of Money Will