Economics · Macroeconomics
Which of the following statements is correct regarding the LM curve?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1In the vertical portion of the LM curve, fiscal policy is highly effective while monetary policy is ineffective.
- 2In the vertical portion of the LM curve, fiscal policy is ineffective, while monetary policy is highly effective.✓
- 3In the horizontal portion of the LM curve, fiscal policy and monetary policy are both effective.
- 4In the horizontal portion of the LM curve, neither fiscal policy nor monetary policy is effective.
Correct answer
In the vertical portion of the LM curve, fiscal policy is ineffective, while monetary policy is highly effective.
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