Answer 3. The increase in the price level decreases the real money supply. When the Federal Reserve reduces the real money supply by decreasing nominal money supply, the LM curve shifts left. It's no different when there’s an increase in the price level, effectively reducing the real money supply. Any time the real money supply falls, the LM curve shifts left. Grab the handle in the lower graph and move it upward representing an increase in the price level to see this in action.