An increase in the growth rate of the money supply in the short run causes a(n)_____ of the domestic currency and a(n)_____ in aggregate demand.

Question

Quizplus · Accepted Answer

An increase in the growth rate of the money supply in the short run leads to an increase in spending and consumption, which boosts aggregate demand. This increase in demand for goods and services puts pressure on the domestic currency, causing it to depreciate. Therefore, a depreciation of the domestic currency and an increase in aggregate demand are the outcomes.

An Increase in the Growth Rate of the Money Supply