Answer:
The correct answer is option D.
Explanation:
A reduction in the money supply will cause a reduction in investment. This is because, as the money supply is reduced the interest rate increases. This further cause the cost of borrowing to increase. As a result, the investment will decline.
A fall in investment will cause production to reduce. To produce fewer firms will need fewer workers. Unemployment will increase as a result.
In the long run, though, reduction in production will cause supply to decline. As a result, the supply curve will shift to the left. This causes a reduction in the price.
