When the central bank increases the money supply,

Name: When the central bank increases the money supply,
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Question

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When the central bank increases the money supply, the money supply curve shifts to the right, increasing the supply of money in the economy. This leads to an increase in the demand for goods and services, causing prices to rise. To combat inflation, the central bank increases interest rates, which reduces borrowing and spending in the economy. Therefore, the interest rate falls.

When the Central Bank Increases the Money Supply