The AS/AD model with sticky prices predicts that, in the long run, a reduction of the money supply results in:

a. lower prices and lower output.
b. no change in prices and lower output.
c. lower prices and no change in output.
d. no change in prices or output.

Answer: c. lower prices and no change in output.

Explanation: A reduction in the money supply causes the aggregate demand to shift to the left. In the short run, there is no change in prices and lower output, but in the long run, prices fall and output returns to its initial level