Money Supply and Value of Money: Impact on Price Level

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply

B. increases the price level and decreases the value of money.

This is because an increase in the money supply leads to more money chasing the same amount of goods and services, causing prices to rise. As prices increase, the purchasing power of each unit of currency decreases, meaning the value of money falls.