If the money supply in the economy were at MS2, and the Federal Reserve Bank used open market operations to move money supply to MS3, the overall direct result in the economy would be:

Question

Quizplus · Accepted Answer

When the money supply in the economy increases from MS2 to MS3, there will be more money available for consumers and businesses to spend. This will lead to an increase in aggregate demand, causing GDP to rise. Therefore, choice C is the correct answer. Choices A, B, and D are incorrect as they suggest a decrease in GDP, which is not the direct result of an increase in the money supply.

If the Money Supply in the Economy Were at MS2