What effect will an increase in the money supply have on the price level and on real GDP?

Question

Quizplus · Accepted Answer

An increase in the money supply leads to an increase in aggregate demand, which in turn leads to an increase in both price level and real GDP. The increase in money supply leads to lower interest rates, which in turn increases investment spending and consumption expenditure. This leads to an increase in aggregate demand and higher prices. However, the increase in aggregate demand also stimulates production and creates employment opportunities, leading to an increase in real GDP.

What Effect Will an Increase in the Money Supply Have