A doubling of the nominal money supply would create a new AD curve at double the vertical position of the original AD curve because
A)at each price level there is a decrease in autonomous spending.
B)each output level requires the same real money supply as in the original situation.
C)the rise in money supply causes increased expectation of further price increases and investment declines.
D)the rise in the money supply causes an excess supply of money and generates rising interest rates.

Question

Quizplus · Accepted Answer

The nominal money supply is not directly related to autonomous spending or expectations of investment and price increases. However, each level of output requires the same real money supply as in the original situation, meaning that a doubling of the nominal money supply would result in the AD curve shifting vertically upward by a factor of two.

A Doubling of the Nominal Money Supply Would Create a New