In the Solow model we typically assume the production function has increasing returns to scale and diminishing marginal product of capital constant returns to scale and increasing marginal product of capital increasing returns to scale and increasing marginal product of capital constant returns to scale and diminishing marginal product of capital According to the aggregate demand curve as ination goes down real spending in the short-run decreases increases stays the same is unknown Ifthe economy is in a liquidity trap then an increase in the money supply will cause people to spend more and save more cause people to spend more and save less cause people to spend less and save more cause people to spend less and save less