Answer:
C) Decreases the interest rate and increases aggregate demand
Explanation:
This is an example of an expansionary monetary policy. An increased money supply means commercial banks have more money and a relaxed reserve requirement thus they have more flexibility to create credit. Increased money supply therefore has reduced interest rates that allow people to take advantage by borrowing.
More money also means people have more money to spend and thus an increased aggregate demand. While the borrowing is also cheaper, people may even borrow to spend more causing a rightward shift in the aggregate demand curve.
Hope that helps.
