The conclusion that an increase in the money supply will lead to lower interest rates is based on which of the following effects?

The real price level refers to the value of goods and services adjusted for inflation. While changes in the money supply can affect price levels, they do not directly explain the mechanism by which increased money supply leads to lower interest rates. This concept primarily relates to inflation rather than to interest rates directly.

Expected inflation can influence interest rates, as lenders may demand higher rates to compensate for anticipated decreases in purchasing power. However, this does not address the immediate impact of an increased money supply on interest rates. The relationship between money supply and interest rates is more directly articulated through liquidity preference rather than expected inflation alone.

Income stabilization involves maintaining consistent income levels across the economy, which can be a goal of monetary policy. While a larger money supply may contribute to stabilizing incomes by promoting spending and investment, it does not directly explain the reduction in interest rates that results from increased liquidity in the market.