In the IS-LM analysis (and ignoring the BP curve), if the economy is located at a point that is to the left (or below) the IS curve and also to the left (or above) the LM curve, there is __________ pressure in the real sector of the economy as well as an excess __________ money.
A) expansionary; demand for
B) expansionary; supply of
C) contractionary; demand for
D) contractionary; supply of

Question

Quizplus · Accepted Answer

When the economy is to the left of the IS curve, there is lower output than equilibrium, indicating expansionary pressure. Being above the LM curve indicates an excess supply of money.

In the IS-LM Analysis (And Ignoring the BP Curve), If