If the money supply increases, then in the IS-LM analysis the ______ curve shifts to the ______.
A) LM; left
B) LM; right
C) IS; left
D) IS; right

Question

Quizplus · Accepted Answer

An increase in the money supply shifts the LM curve to the right in the IS-LM analysis. This is because a larger money supply will result in lower interest rates, which in turn encourages more investment and consumption spending, leading to an increase in aggregate demand.

If the Money Supply Increases, Then in the IS-LM Analysis