As China’s Money Supply of M2 reaches an unprecedented scale of nearly 300 trillion CNY, the article aims to analyse the significance of money supply, especially M2, and its possible effect on China’s economy under such background and post-pandemic era. The reaction of different economic agents, as well as Auxiliary policy to reduce the side effects arising from increasing the money supply will be examined in this essay through ideas from mainstream economic schools, including Classical, Keynesian, and Modern monetarist perspectives. The analysis mainly focuses on money supply, interest rates, velocity of money, and real money balances, and involves the standard of living as well as the economic prospect. Applying the quantity theory of money and the function of money demand, it is found that a rise in money supply would cause a decline in the income velocity of money and interest rate to be lowered along with a decrease in demand for real money balances. Through the IS-LM model, the perceived interest rate is examined qualitatively, and the Possible disposition of extra money supply is considered to be in the financial market or to be released in circulation slowly. Rather than applying quantitative easing immediately by increasing the money supply, the confidence level deters such an approach from being effective, coupled with a possibility to lower interest rates.