An increase in the money supply will
A)decrease the quantity of money held at every interest rate.
B)increase the quantity of money held at every interest rate.
C)shift the LM curve leftward.
D)None of the above.

Question

Quizplus · Accepted Answer

An increase in the money supply will lead to an increase in the quantity of money held at every interest rate, as more money will be available for lending and borrowing. This will lead to a rightward shift of the LM curve as the lower interest rates encourage more investment and borrowing, ultimately leading to an increase in output and income in the economy.

An Increase in the Money Supply Will