Other things the same, if the Fed increases the quantity of money, the supply of money curve shifts
A) rightward and the nominal interest rate decreases.
B) leftward and the nominal interest rate increases.
C) rightward and the real interest rate increases.
D) leftward and the real interest rate increases.
E) leftward and the nominal interest rate decreases.

Question

Quizplus · Accepted Answer

Increasing the quantity of money shifts the supply of money curve rightward, leading to a decrease in the nominal interest rate. This is because whenever there is more money available in the economy, lenders will compete against each other to lend it out, driving down the interest rates they offer. Conversely, when there is less money available, borrowers will compete against each other to borrow it, driving up interest rates.

Other Things the Same, If the Fed Increases the Quantity