Question

An increase in the money supply will: Group of answer choices increase interest rates and increase the equilibrium GDP. lower interest rates and increase the equilibrium GDP. increase interest rates and lower the equilibrium GDP. lower interest rates and lower the equilibrium GDP.

Answer 1

Answer:

Option B, lower interest rates and increase the equilibrium GDP.

Explanation:

Option B is correct because the increase in the money supply will reduce the interest rate and increase the real GDP or output on the country because the rise in the money supply will results in more money in the hand of people. Therefore, more investment and production will be done in the economy. Thus, a rise in the production of output in the economy will result in the rise of GDP