Economics · Macroeconomics
When a country increases its nominal money supply, how does it affect the LM curve and the overall equilibrium in the IS-LM framework?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The LM curve remains unchanged, having no impact on equilibrium interest rates or income.
- 2The LM curve shifts leftward, decreasing interest rates and increasing income.
- 3The LM curve shifts rightward, decreasing interest rates and increasing income.✓
- 4The LM curve shifts leftward, increasing interest rates and decreasing income.
Correct answer
The LM curve shifts rightward, decreasing interest rates and increasing income.
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