How will an increase in the money supply affect money markets?
A) An increase in the money supply will increase the demand for money at each interest rate.
B) An increase in the money supply will decrease the demand for money at each interest rate.
C) An increase in the money supply will lead people to try to exchange money for interest-bearing assets.
D) An increase in the money supply will lead people to try to exchange interest-bearing assets for money.

Question

How will an increase in the money supply affect money markets?  
A) An increase in the money supply will increase the demand for money at each interest rate. 
B) An increase in the money supply will decrease the demand for money at each interest rate. 
C) An increase in the money supply will lead people to try to exchange money for interest-bearing assets. 
D) An increase in the money supply will lead people to try to exchange interest-bearing assets for money.

Quizplus · Accepted Answer

An increase in the money supply typically leads people to try to exchange the excess money for interest-bearing assets, such as bonds, to earn a return on their money rather than holding onto the excess cash which earns no interest.

How Will an Increase in the Money Supply Affect Money