Which of the following is most likely to result from a substantial increase in the money supply?
A) A lowering of inflation
B) A reduction of interest rates
C) An increase in interest rates
D) An increase in the value of a dollar

Question

Quizplus · Accepted Answer

An increase in the money supply generally leads to a reduction in interest rates as banks have more money to lend out and competition for borrowers increases. This leads to increased demand for loans, which in turn leads to increased economic activity and potentially increased inflation. Therefore, A, C, and D are unlikely outcomes of a substantial increase in the money supply.

Which of the Following Is Most Likely to Result from a Substantial