Which of the following will cause the LM curve to shift down?
A) A decrease in the expected future interest rate.
B) A decrease in the price level.
C) A decrease in expected future taxes.
D) A decrease in current income.
E) A decrease in expected future income.

Question

Quizplus · Accepted Answer

A decrease in the price level will cause a decrease in the demand for money, which shifts the LM curve down. A decrease in the expected future interest rate (A) or a decrease in expected future taxes (C) would shift the IS curve to the right, but would not directly affect the LM curve. Changes in current income (D) or expected future income (E) would also shift the IS curve, but would not directly affect the LM curve.

Which of the Following Will Cause the LM Curve to Shift