A decrease in the real money supply leads to an increase in the equilibrium interest rate and equilibrium level of output in the IS-LM model.

Question

Quizplus · Accepted Answer

A decrease in the real money supply would lead to an increase in the equilibrium interest rate but a decrease in the equilibrium level of output in the IS-LM model, as higher interest rates discourage investment and consumption.

A Decrease in the Real Money Supply Leads to an Increase