Which of the following statements about the liquidity and money (LM) curve is NOT true?
A) The LM curve will shift to the right if the monetary authorities increase the money supply, all other things being equal.
B) The LM curve will shift to the left if the general level of prices in the economy rises, all other things being equal.
C) The LM curve shows all combinations of interest rate and level of national income at which the money market is in equilibrium.
D) The LM curve is unaffected by inflation.

Question

Quizplus · Accepted Answer

The statement "The LM curve is unaffected by inflation" is not true. Inflation affects the demand for money, which in turn affects the position of the LM curve.

Which of the Following Statements About the Liquidity and Money