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    Increasing the quantity of money

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    What is the effect of an increase in the quantity of money?

    What is the difference between real variables and nominal variables? Are these variables affected by the quantity of money? If so, how? Use examples from the text, the South University Online Library, or the Internet when answering this question.

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    Increasing the quantity of money reduces interest rates. To see how this happens consider a money market in equilibrium. Suppose the initial quantity of money supplied is MS0, and money demand is MD. When money supply rises to MS1, the money supply curve shifts to the right, and the intersection point of the new money supply curve and money demand curve moves towards the lower right corner. This indicates that the ...