In the IS-LM model, a rise in the general level of prices will shift
A) the LM curve to the left.
B) the LM curve to the right.
C) the IS curve to the left.
D) both the IS and LM curves.

Question

Quizplus · Accepted Answer

An increase in the general level of prices will shift the LM curve to the left because it increases the demand for money, leading to an increase in interest rates. This, in turn, decreases investment and shifts the LM curve to the left.

In the IS-LM Model, a Rise in the General Level