What adjusts to restore general equilibrium after a shock to the economy?
A)the LM curve
B)the IS curve
C)the FE line
D)the labour supply curve

Question

Quizplus · Accepted Answer

The LM curve adjusts to restore general equilibrium after a shock to the economy. The LM curve represents the relationship between the interest rate and the money supply. When there is a shock to the economy, such as a change in government spending or a change in the money supply, the LM curve will shift. This shift will cause the interest rate to change, which will then lead to a change in investment and consumption. These changes will eventually lead to a new equilibrium in the economy.

What Adjusts to Restore General Equilibrium After a Shock to the Economy