If the LM curve shifts down, this would be consistent with:
A) a rise in the money supply.
B) a fall in interest rates.
C) a rise in interest rates.
D) both a rise in the money supply and a fall in interest rates.

Question

Quizplus · Accepted Answer

The LM curve shows the combinations of interest rates and output levels at which the money market is in equilibrium. A downward shift in the LM curve means that for any given level of output, the interest rate is lower. This can happen if there is an increase in the money supply, as there is more money available to borrow and lend, and lenders may therefore offer lower interest rates in order to be competitive.

If the LM Curve Shifts Down, This Would Be Consistent