Final answer:
A leftward shift in money demand in the money market usually leads to a decrease in interest rates. A decline in interest rates is prompted by a fall in demand for money or a rise in supply, while an increase in the quantity of loans is caused by either a rise in demand or supply.
Step-by-step explanation:
When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, this indicates a decrease in the demand for money.
According to the laws of supply and demand, this would mean that, at the current interest rate, there is now an excess supply of money.
As a result, the price of borrowing money, which is the interest rate, is likely to fall to bring the market back to equilibrium. Therefore, the initial effect of a leftward shift in money demand would be a decrease in interest rates.
In the context of the financial market, a decline in interest rates is most directly caused by either a fall in demand for loans or a rise in supply of loanable funds.
Conversely, an increase in the quantity of loans made and received would typically occur when there is either a rise in demand for loans or a rise in the supply of loanable funds.