In Figure 15.4,an increase in the money supply from $100 billion to $135 billion will cause a

Question

Quizplus · Accepted Answer

An increase in the money supply will lead to a decrease in the interest rate, according to the theory of liquidity preference. This will incentivize an increase in investment, leading to an expansion in aggregate demand. However, the specific magnitude of this increase in investment cannot be determined from the information given, so A is not the correct choice. Since an increase in aggregate demand is likely to occur, C is also incorrect. Finally, there is no information to indicate that the money demand curve will shift, so D is not the correct choice.