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:

Majority

The greater part or number; the number greater than half the total.

Prejudice

Preconceived opinion or bias against an individual or group without sufficient knowledge, thought, or reason.

Negative Stereotype

An oversimplified and widely held fixed idea or image of a particular type of person or thing, which is often negative and prejudicial.

Dislike

A feeling of distaste or hostility towards someone or something.