When the central bank ________ the money supply, the MP curve shifts to the right, interest rates ________, and equilibrium aggregate output ________, everything else held constant.
A) increases; fall; increases
B) increases; rise; decreases
C) decreases; rise; decreases
D) decreases; fall; increases

Question

Quizplus · Accepted Answer

When the central bank increases the money supply, the MP curve shifts to the right, which means that the interest rates fall and equilibrium aggregate output increases, everything else held constant. Therefore, option A is the correct answer.

When the Central Bank ________ the Money Supply, the MP