For a given fixed price level, an increase in the money supply will lead to:
A)an increase in the interest rate, which in turn decreases the quantity of goods and services demanded
B)an increase in the interest rate, which in turn increases the quantity of goods and services demanded
C)a fall in the interest rate, which in turn increases the quantity of goods and services demanded
D)a fall in the interest rate, which in turn decreases the quantity of goods and services demanded

Question

Quizplus · Accepted Answer

An increase in the money supply will lower interest rates because there is now more money in circulation to lend out, causing lenders to lower the interest rates they charge. This will lead to an increase in the quantity of goods and services demanded, as individuals and firms are more likely to borrow and spend when interest rates are low. Therefore, option C is the correct choice.

For a Given Fixed Price Level, an Increase in the Money