Based on our understanding of the IS- LM model that takes into account dynamics, we know that a decrease in the money supply will cause:

Question

Quizplus · Accepted Answer

In the IS-LM model, a decrease in the money supply shifts the LM curve upward and to the left. This leads to a decrease in equilibrium output (Y) and an increase in equilibrium interest rates (i). However, these adjustments occur gradually over time, rather than immediately. Therefore, option C is the most accurate description of the effects of a decrease in the money supply.

Based on Our Understanding of the IS- LM Model That