why will price level fall
if leftward shift on supply curve ;price lvl increases right
and since money supply decreases int rate will increase(monetary policy)
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Whenever the central bank cuts the money supply, it means there is less money circulating in the economy and less supply means that the interest rates have gone up. If interest rates have gone up, then the cost of borrowing becomes high and this reduces investment by Private corporations and the aggregate price (output) will fall.
On the contrary, in an environment of high interest rates, the opportunity cost of holding money is very high and people might not want to spend this money and invest in stocks bonds etc. to gain high interests.