For a given money demand curve,an increase in money supply:
A)drives up the real interest rate.
B)lowers the opportunity cost of holding money.
C)decreases the quantity of money demanded.
D)drives down the price level in an economy.
E)contracts the total output produced in an economy.

Question

Quizplus · Accepted Answer

An increase in money supply would lower the opportunity cost of holding money, making it easier for individuals to acquire more money. Therefore, the quantity of money demanded will increase. This will drive down the real interest rate and potentially increase the price level in the economy. However, it will not directly contract the total output produced in the economy.

For a Given Money Demand Curve,an Increase in Money Supply