Use the following to answer questions . Exhibit: Monetary Policy and Long-Run Aggregate Demand and Aggregate Supply -(Exhibit: Monetary Policy and Long-Run Aggregate Demand and Aggregate Supply) Assume that the economy is at point b. A decrease in the money supply would cause A) a shift of the aggregate demand curve from AD₁ to AD₂. B) a shift of the aggregate demand curve from AD₂ to AD₁. C) a shift of the short-run aggregate supply curve from AS₁ to AS₂. D) a shift of the short-run aggregate supply curve from AS₂ to AS₁.

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A decrease in the money supply would lead to a decrease in aggregate demand, which would shift the AD curve to the left, from AD₂ to AD₁. It would not have any immediate effect on the short-run aggregate supply curve.

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