Aggregate demand (AD) is the sum of consumer spending, government spending, investment, and net exports.
The AD curve assumes that money supply is fixed.
The decrease in the money supply is mirrored by an equal decrease in the nominal output, otherwise known as Gross Domestic Product ( GDP ).
The decrease in the money supply will lead to a decrease in consumer spending. This decrease will shift the AD curve to the left.
The increase in the money supply is mirrored by an equal increase in nominal output, or Gross Domestic Product (GDP).
The increase in the money supply will lead to an increase in consumer spending. This increase will shift the AD curve to the right.
Increased money supply causes reduction in interest rates and further spending and therefore an increase in AD.
steve williams answered the question on January 23, 2018 at 11:19
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