Answer:
The correct answer is option D.
Explanation:
An increase in the money supply will lead to a rightward shift in the money supply curve. The interest rate will fall causing the cost of lending to decline. Consequently, the level of investment will increase
This will further cause the aggregate demand to increase. With the increase in demand, the price level will increase as well. Thus, an increase in the money supply has an inflationary effect on the economy.
