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Money Supply and Inflation

An increase i...

Question

An increase in the money supply will cause the AD curve to:

A

shift leftward.

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B

shift rightward.

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C

stay the same

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D

shift leftward, but without affecting the price level.

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Solution

The correct option is B
shift rightward.

An increase in the money supply increases the aggregate demand, as people now hold more money.

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