The monetarists believe that the LM schedule
A)and the IS schedule are both steep.
B)is flat while the IS schedule is steep.
C)and the IS schedule are both quite flat.
D)is steep and the IS schedule is relatively flat.

Question

Quizplus · Accepted Answer

Monetarists believe in the importance of controlling the money supply to influence economic growth. They argue that the LM schedule, which shows the relationship between interest rates and the supply of money, is steep because changes in the money supply have a large impact on interest rates. However, they believe the IS schedule, which shows the relationship between interest rates and the level of investment and consumption, is relatively flat because changes in interest rates have a smaller impact on these factors. Therefore, the best choice is D - the LM schedule is steep and the IS schedule is relatively flat.

The Monetarists Believe That the LM Schedule