When the money market is represented in a diagram with the value of money on the vertical axis, which statement best describes the effects of an increase in money supply?
A) It increases the price level and the value of money.
B) It increases the price level and decreases the value of money.
C) It decreases the price level and increases the value of money.
D) It decreases the price level and the value of money.

Question

Quizplus · Accepted Answer

An increase in money supply shifts the money supply curve to the right, decreasing the interest rate. This results in an increase in aggregate demand and an increase in the price level. As a result, the value of money decreases.

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