From an initial IS-LM equilibrium with normally-sloped IS and LM curves,the money supply falls.At the new IS-LM equilibrium we have some combination of a ________ income and a ________ interest rate.
A)higher,higher
B)higher,lower
C)lower,higher
D)lower,lower

Question

Quizplus · Accepted Answer

When the money supply falls, the LM curve shifts up and to the left, leading to a higher equilibrium interest rate and a lower equilibrium income. Therefore, the correct combination is a lower income and a higher interest rate, which is only represented in option C.

From an Initial IS-LM Equilibrium with Normally-Sloped IS and LM