Practice mode Macroeconomic Policy Tools

In the market for real output, what is the immediate effect of an increase in the money supply?

Correct answer D. To shift the aggregate demand curve to the right

Explanation

Extra money lowers interest rates and raises spending on investment and consumer durables at every price level, so the first effect is an outward shift in aggregate demand.

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In the market for real output, what is the immediate effect of an increase in the money supply?

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In the market for real output, what is the immediate effect of an increase in the money supply?

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