Other things being equal, an increase in the supply of money

Question

Quizplus · Accepted Answer

An increase in the supply of money leads to an increase in the amount of money in circulation, which in turn leads to an increase in demand for goods and services, causing an increase in the price level. Other factors being equal, this increase in the money supply would not significantly affect the amount of money balances held by individuals or generate significant changes in relative prices. The decrease in aggregate demand as mentioned in choice C is incorrect, as an increase in the money supply would lead to an increase in aggregate demand.

Other Things Being Equal, an Increase in the Supply of Money