The income effect claims that: O A. as money supply increases, wealth/income increases, leading to an increase in interest rates. O B. as money supply increases, wealth/income decreases, leading to an increase in interest rates. OC. All the listed options are incorrect. OD. as money supply decreases, wealth/income increases, leading to a decrease in interest rates. Use the following statements to answer this question: 1. Higher government deficits increase the supply of bonds and shift the supply curve to the left. II. Increase in expected inflation shifts the supply curve to the right and the cost of borrowing declines. O A. I and II are incorrect. OB. I is correct, Il is incorrect. OO. I is incorrect, ll is correct. ODI and II are correct