An increase in the real money supply will have its maximum effect on the equilibrium level of GDP when the
A)LM curve is vertical.
B)LM curve is horizontal.
C)IS curve is vertical.
D)IS curve is negatively sloped.

Question

Quizplus · Accepted Answer

An increase in the real money supply will shift the LM curve to the right. When the LM curve is vertical, a shift to the right will have the maximum effect on the equilibrium level of GDP.

An Increase in the Real Money Supply Will Have Its