When the Bank of Canada increases the money supply, the interest rate decreases. This decrease in the interest rate increases consumption and investment demand so the aggregate-demand curve shifts to the right.

Question

Quizplus · Accepted Answer

This is known as expansionary monetary policy, where increasing the money supply leads to lower interest rates, which in turn increases consumption and investment, leading to a rightward shift in the aggregate-demand curve.

When the Bank of Canada Increases the Money Supply, the Interest