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Question
The direct effect of an increase in the money supply is
A) people will spend the extra money, causing the aggregate demand curve to shift to the right and prices to rise, and causing the economy to go into recession.
B) people will save the money, causing an increase in bank deposits, causing interest rates to fall, and loans to expand.
C) people will save more money, causing a decrease in economic activity and a fall in prices.
D) people will spend the extra money, causing the aggregate demand curve to shift to the right, creating an increase in economic activity.
Answer
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