When the money supply decreases
A)interest rates fall and so aggregate demand shifts right.
B)interest rates fall and so aggregate demand shifts left.
C)interest rates rise and so aggregate demand shifts right.
D)interest rates rise and so aggregate demand shifts left.

Question

Quizplus · Accepted Answer

When the money supply decreases, interest rates rise, which causes a decrease in spending and investment. This results in a leftward shift of the aggregate demand curve. Therefore, the correct answer is D.

When the Money Supply Decreases