FIGURE 10-6: Shifts in the Aggregate Demand Curve Changes in the money supply shift the aggregate demand curve. In panel (a), a decrease in the money supply M reduces the nominal value of output PY. For any given price level P, output Y is lower. Thus, a decrease in the money supply shifts the aggregate demand curve inward from AD₁ to AD₂. In panel (b), an increase in the money supply M raises the nominal value of output PY. For any given price level P, output Y is higher. Thus, an increase in the money supply shifts the aggregate demand curve outward from AD₁ to AD₂.