An increase in the money stock has no effect on equilibrium income whenever the
A)IS curve is horizontal.
B)IS curve is vertical.
C)LM curve is vertical.
D)LM curve is horizontal.

Question

Quizplus · Accepted Answer

When the IS curve is vertical, an increase in the money stock will not affect equilibrium income because the level of income is already determined by the availability of factors of production and technology. An increase in the money stock will only lead to an increase in the price level.

An Increase in the Money Stock Has No Effect on Equilibrium