An increase in the money supply decreases the equilibrium interest rate and shifts the aggregate-demand curve to the right.

Question

Quizplus · Accepted Answer

An increase in the money supply lowers the equilibrium interest rate due to the higher availability of money, which in turn encourages borrowing and spending. This increase in spending shifts the aggregate-demand curve to the right, as the overall demand for goods and services in the economy increases.

An Increase in the Money Supply Decreases the Equilibrium Interest