An increase in the money supply will

Question

Quizplus · Accepted Answer

According to the quantity theory of money, an increase in the money supply leads to an increase in the demand for goods and services, which in turn leads to an increase in spending and economic activity. This increase in economic activity creates a higher demand for loans, which causes interest rates to decrease in order to stimulate borrowing and investment. Therefore, an increase in the money supply will decrease the interest rate.

An Increase in the Money Supply Will