When the money market is represented in a diagram with the value of money on the vertical axis,how does the money supply curve shift from an increase in the money supply?
A) It shifts to the right,lowering the price level.
B) It shifts to the right,raising the price level.
C) It shifts to the left,raising the price level.
D) It shifts to the left,lowering the price level.

Question

Quizplus · Accepted Answer

An increase in the money supply shifts the money supply curve to the right, which leads to an excess supply of money at the initial price level. In order to get rid of this excess supply, people will increase spending, driving up the price level until the money market reaches equilibrium again. Therefore, the money supply curve shifting to the right leads to an increase in the price level.

When the Money Market Is Represented in a Diagram with the Value