An expansion in the money supply will most likely change the nominal interest rate and aggregate demand in which of the following ways in the short run?

An expansion in the money supply is a monetary policy tool used by central banks to stimulate the economy. Here's how it would likely affect the nominal interest rate and aggregate demand in the short run:

1. Decrease in Nominal Interest Rate: When the money supply increases, there is more money available in the economy for businesses and individuals to borrow. This increased supply of money typically leads to a decrease in the nominal interest rate. This is because banks and other financial institutions have more funds to lend, which increases the competition among lenders and drives down the cost of borrowing, i.e., the interest rate.

2. Increase in Aggregate Demand: A decrease in the nominal interest rate makes borrowing cheaper. This encourages businesses to invest in new projects and individuals to spend more on goods and services, as the cost of borrowing to finance these expenditures is lower. This increase in investment and consumer spending leads to an increase in aggregate demand.

So, in the short run, an expansion in the money supply will most likely lead to a decrease in the nominal interest rate and an increase in aggregate demand.