How does an increase in the money supply, through expansionary monetary policy, typically affect the aggregate supply curve and the overall output level in the short run?

When the central bank increases the money supply through expansionary monetary policy, it usually lowers interest rates. Lower interest rates make it cheaper for businesses and consumers to borrow money, which can lead to more spending and investment. This increase in spending raises the overall demand for goods and services in the economy. In the short run, this higher demand can shift the aggregate supply curve to the right, resulting in more output and possibly higher prices. For example, if a company can borrow money at a lower rate, it might invest in new machinery, allowing it to produce more products and hire more workers, thus increasing overall economic output.