All other things unchanged, why does an increase in money demand cause the aggregate demand curve will shift to the left?

Question

Quizplus · Accepted Answer

An increase in money demand leads to a higher interest rate, which increases the cost of borrowing and lowers the incentive for investment and consumption. As a result, the quantity of investment and net exports decreases, causing the aggregate demand curve to shift to the left. Option A is incorrect because an increase in bond prices would increase consumption spending, not reduce it. Option B is incorrect because a decrease in bond interest rates would actually lead to an increase in investment and net exports, not a decrease. Option D is incorrect because a lower interest rate would actually lead to higher net exports, not lower.

All Other Things Unchanged, Why Does an Increase in Money