In the flexible price macroeconomy with the demand for money inversely related to the nominal interest rate, an increase in the rate of growth of the money supply

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In a flexible price macroeconomy, an increase in the rate of growth of the money supply typically leads to an immediate jump in the price level due to more money chasing the same amount of goods and services, which increases the inflation rate. As the nominal interest rate rises, the quantity of money demanded decreases because people prefer to hold less money when it loses value faster. This scenario also leads to an increase in the velocity of money, as each unit of currency is used more frequently to facilitate transactions in the face of higher prices.

In the Flexible Price Macroeconomy with the Demand for Money