An example of the asset price effect occurs when the increase in the money supply leads to:
A) increases in the prices of goods and services.
B) increases in the purchasing power of each unit of currency.
C) a decrease in the value of savings accounts.
D) an increase in the prices of shares of stocks.

Question

Quizplus · Accepted Answer

The asset price effect refers to how changes in the money supply can influence the prices of assets like stocks. When the money supply increases, it often leads to lower interest rates, which can make stocks more attractive compared to bonds. This increased demand for stocks can drive up their prices.

An Example of the Asset Price Effect Occurs When the Increase