The long-run effect of an increase in the money supply is to

Question

a. decrease the price level.
b. decrease the interest rate.
c. increase the interest rate.
d. increase the price level.

Answer 1

The long-run effect of an increase in the money supply is to:

d. increase the price level.

In the long run, an increase in the money supply typically leads to inflation, which results in higher price levels as more money chases the same amount of goods and services in the economy.