An increase in the money ________ shifts the MP curve to the ________, causing the interest rate to fall and output to rise, everything else held constant.
A) demand; right
B) demand; left
C) supply; right
D) supply; left

Question

Quizplus · Accepted Answer

An increase in the money supply shifts the MP curve to the right, causing the interest rate to fall and output to rise (assuming everything else is held constant). This is because an increase in the money supply leads to an increase in the supply of loanable funds, which lowers the interest rate and increases investment and consumption spending, thereby increasing output.

An Increase in the Money ________ Shifts the MP Curve