An increase in the money supply is likely to

A) lower interest rates.
B) raise interest rates.
C) decrease the quantity of money demanded.

Question

An increase in the money supply is likely toA) lower interest rates.B) raise interest rates.C) decrease the quantity of money demanded.

Joshivel Perucho · Accepted Answer

Final Answer : A, Explanation :  When the money supply increases, borrowers have access to more money to borrow, which leads to an increase in the supply of credit. With a larger supply of credit, lenders must compete to attract borrowers, which lowers interest rates.

An increase in the money supply is likely to

A) lower interest rates.
B) raise interest rates.
C) decrease the quantity of money demanded.

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