In the short run, an increase in the money supply causes interest rates and aggregate demand to do what?
A)It causes interest rates to increase and aggregate demand to shift right.
B)It causes interest rates to increase and aggregate demand to shift left.
C)It causes interest rates to decrease and aggregate demand to shift right.
D)It causes interest rates to decrease and aggregate demand to shift left.

Question

Quizplus · Accepted Answer

An increase in the money supply typically lowers interest rates, making borrowing cheaper, which in turn increases aggregate demand as consumers and businesses are more likely to spend and invest.

In the Short Run, an Increase in the Money Supply