-In the above figure, assume the economy is in equilibrium at point d. Then the Fed decreases the money supply so that the new aggregate demand curve is AD₁. In the long run, the new price level will be

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In the long run, a decrease in the money supply will shift the aggregate demand curve leftward, leading to a lower price level. If the economy was initially in equilibrium at point d with a price level of 130, the new long-run equilibrium price level will be lower, at 100.

-In the Above Figure, Assume the Economy Is in Equilibrium