How does an increase in the money supply, as a result of expansionary monetary policy, typically influence inflation rates in an economy experiencing a recession?

When a central bank increases the money supply through expansionary monetary policy, it aims to stimulate the economy, especially during a recession. More money in circulation means people and businesses have more funds to spend, which can lead to increased demand for goods and services. As demand rises, businesses may raise their prices to keep up with the higher consumption, which can result in inflation. For example, if a government lowers interest rates, a family might take out a loan to buy a new car, and this increased spending can push car prices up. Therefore, while the goal is to boost economic activity, it can also lead to higher inflation if the money supply grows too quickly compared to the economy's ability to produce goods and services.