Use the following to answer questions : Exhibit: IS-LM to Aggregate Demand -(Exhibit: IS-LM to Aggregate Demand) Based on the graph, if LM₃ shifts to LM₂ because the money supply decreases from M₃ to M₂ then, holding other factors constant: A) the aggregate demand curve will shift to the right. B) the aggregate demand curve will shift to the left. C) this represents a movement up the aggregate demand curve. D) this represents a movement down the aggregate demand curve.

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A decrease in the money supply shifts the LM curve to the left, resulting in a higher interest rate and lower output. This causes a leftward shift of the aggregate demand curve.

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