Consider a macro-economy denoted by the following equations: M = kP y + L(r); S (r) = I (r); y = y; where M, P, y and r represent, respectively, money supply, the price level, output and the interest rate, while k and y are positive constants. Furthermore, S (r) is the savings function, I (r) is the investment demand function and L(r) is the speculative demand for money function, with , S 0 (r) > 0, I 0 (r) < 0 and L 0 (r) < 0. Then, an increase in M must

(a) increase P proportionately. (b) reduce P. (c) increase P more than proportionately. (d) increase P less than proportionately.