Holding output, Y, fixed, a reduction in the demand for money is the equivalent of a(n) _____ in velocity and will shift the aggregate demand curve to the _____.
A)increase; right
B)increase; left
C)decrease; right
D)decrease; left

Question

Quizplus · Accepted Answer

A reduction in the demand for money increases the velocity of money because people are holding less money relative to their income, leading to more spending. This increase in velocity shifts the aggregate demand curve to the right.

Holding Output, Y, Fixed, a Reduction in the Demand for Money