How Does a Reduction in Money Supply Affect the Aggregate

question 120

Multiple Choice

How does a reduction in money supply affect the aggregate demand curve?  

• A) The curve shifts leftward, lowering real GDP and the price level. 
• B) The curve shifts leftward, raising real GDP and the price level. 
• C) The curve shifts rightward, lowering real GDP but raising the price level. 
• D) The curve shifts rightward, raising real GDP and the price level.

---

Definitions:

Audit Liability

The legal responsibility auditors face for failing to detect or report inaccuracies in financial statements.

Securities Exchange Act

A U.S. federal law enacted in 1934 to govern the trading of securities, such as stocks and bonds, in the secondary market, aiming to promote transparency, fairness, and integrity in the marketplaces.

SEC Rule 10b-5

A regulation by the Securities and Exchange Commission that prohibits fraud and misrepresentation in securities trading.

Privity

A doctrine in contract law that holds that contracts are private agreements between the parties who have mutually consented to them, and thus, only those parties have the rights and liabilities under the contract.