Figure 10.1
-In Figure 10.1, if the money supply decreases then:

Question

Figure 10.1 
-In Figure 10.1, if the money supply decreases then:

Quizplus · Accepted Answer

According to the quantity theory of money, a decrease in the money supply leads to a decrease in aggregate demand, causing a decrease in the equilibrium price level. Therefore, the best choice is B. Money demand may increase or decrease depending on other factors such as interest rates and the level of economic activity. However, this is not directly related to the decrease in the money supply mentioned in the question.

Figure 10.1 -In Figure 10.1, If the Money Supply Decreases Then