The Direct Effect of an Increase in the Money Supply

question 101

Multiple Choice

The direct effect of an increase in the money supply is to

• A) raise interest rates as people increase their saving.
• B) increase interest rates as people anticipate higher inflation in the future.
• C) increase aggregate demand as people try to spend their excess money balances.
• D) decrease aggregate demand as people anticipate future economic problems.

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Definitions:

Employees' Time

The hours workers spend on job-related activities, including both productive work and periods of availability.

Forecasting

The process of making predictions about future events or trends, often based on historical data and analysis.

Informal

Characterized by a relaxed, friendly, or unofficial style, manner, or nature.