What would be the ultimate effect of a reduction in the money supply?
A) a leftward shift of the aggregate demand curve
B) a rightward shift of the short-run aggregate supply curve
C) a movement upward along the aggregate demand curve
D) a movement downward along the aggregate demand curve

Question

What would be the ultimate effect of a reduction in the money supply?  
A) a leftward shift of the aggregate demand curve 
B) a rightward shift of the short-run aggregate supply curve 
C) a movement upward along the aggregate demand curve 
D) a movement downward along the aggregate demand curve

Quizplus · Accepted Answer

A reduction in the money supply would lead to a decrease in consumer spending, investment, and government spending, ultimately causing a leftward shift of the aggregate demand curve. This is because there would be less money available for consumers and businesses to spend, leading to a decrease in demand for goods and services. As a result, firms would produce less, leading to lower economic output and higher unemployment.

What Would Be the Ultimate Effect of a Reduction in the Money