For any given interest rate and price level, an increase in the money supply:
A) lowers income.
B) raises income.
C) has no effect on income.
D) lowers velocity.

Question

Quizplus · Accepted Answer

According to the Quantity Theory of Money, an increase in the money supply leads to an increase in aggregate demand, which leads to an increase in real GDP and therefore income. So, an increase in the money supply raises income.

For Any Given Interest Rate and Price Level, an Increase