When the central bank ________ the money supply,the LM curve shifts to the right,interest rates ________,and equilibrium aggregate output ________,everything else held constant.
A)increases;fall;increases
B)increases;rise;decreases
C)decreases;rise;decreases
D)decreases;fall;increases

Question

Quizplus · Accepted Answer

When the central bank increases the money supply, it injects more liquidity into the economy, causing interest rates to fall. As a result, investment and consumption increase, leading to a higher equilibrium aggregate output. Thus, the LM curve shifts to the right in response to an expansionary monetary policy.

When the Central Bank ________ the Money Supply,the LM Curve