If the Bank of Canada decreases the money supply, the equilibrium value of money decreases and the equilibrium price level must increase.

Question

Quizplus · Accepted Answer

If the Bank of Canada decreases the money supply, the equilibrium value of money increases and the equilibrium price level must decrease. This is because there is less money available in the economy, and therefore each unit of money becomes more valuable, resulting in a decrease in prices.

If the Bank of Canada Decreases the Money Supply, the Equilibrium