When the money market is depicted 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 creates an excess supply of money, causing people to spend more.
B) It creates an excess supply of money, causing people to spend less.
C) It creates an excess demand for money, causing people to spend more.
D) It creates an excess demand for money, causing people to spend less.

Question

Quizplus · Accepted Answer

An increase in money supply causes the supply curve to shift to the right, resulting in a surplus or excess supply of money at the original equilibrium point. This surplus of money leads to increased spending as people have more money to use.

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