When the money market is represented in a diagram with the value of money on the vertical axis, how does the money supply curve shift from a decrease in the money supply?
A) It shifts to the right, lowering the price level.
B) It shifts to the right, raising the price level.
C) It shifts to the left, raising the price level.
D) It shifts to the left, lowering the price level.

Question

Quizplus · Accepted Answer

A decrease in the money supply will cause the money supply curve to shift to the left. This means that there is less money available in the market, leading to an increase in the value of money. As the value of money increases, the price level decreases. Therefore, the correct choice is D, which indicates that the money supply curve shifts to the left, lowering the price level.

When the Money Market Is Represented in a Diagram with the Value