A shift in the LM curve can occur because
A) interest rates change so frequently.
B) of contractions and expansions in the money supply.
C) of the strength of the velocity of circulation.
D) of a shift in the demand for money.

Question

Quizplus · Accepted Answer

A shift in the LM curve can occur due to contractions and expansions in the money supply, which can affect the equilibrium interest rate and output level. Changes in interest rates or the velocity of circulation may cause movements along the LM curve, but would not cause a shift. A shift in the demand for money would impact the IS curve, not the LM curve.

A Shift in the LM Curve Can Occur Because