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Sagot :
An increase in the money supply decreases the equilibrium interest rate and increases the aggregate demand is TRUE.
Money supply is the amount of money circulate in an economy. The amount of money supply may be increased or decreased through monetary policies made by the central bank.
To inrease the money supply in the market, the central bank will decrease the interest rate to encourage people to spend more of their money instead of investing or saving it. People then will purchase more units of products, hence shift the aggregate demand curve to the right or increase it.
Because of this shift, the real GDP will increase.
People would think they no longer need to work because they already have enough money, but manufacturers could not produce products without any labors. Hence, the manufacturer will face labor shortage and offer higher labor rates to attract labors.
This activity done by the manufacturer will shift the short-run aggregate supply to the left. This will bring back the real GDP position to its original equilibrium but with higher price. This event would cause an inflation to the economy. This event is called as Demand-Pull Inflation.
Learn more about Money Supply here: https://brainly.com/question/13105661
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