The price level falls if either
A)money demand or money supply shifts rightward.
B)money demand shifts rightward or money supply shifts leftward.
C)money demand shifts leftward or money supply shifts rightward.
D)money demand or money supply shifts leftward.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, the price level is directly proportional to the money supply. Therefore, if money supply shifts leftward, there will be a decrease in the price level. Similarly, if money demand shifts rightward, it means that people are willing to pay more for money, and the price level falls. Hence, when either money demand shifts rightward or money supply shifts leftward, the price level falls.

The Price Level Falls If Either