The LM curve will shift to the right if:
A)the average price level decreases.
B)the money supply decreases.
C)the money demand increases.
D)the interest rate decreases.

Question

Quizplus · Accepted Answer

The LM curve represents the relationship between liquidity (money supply and demand) and money market equilibrium at various levels of income and interest rates. A decrease in the average price level increases the real money supply (since the nominal money supply is fixed by the central bank), making more money available relative to the demand. This leads to a lower interest rate for any given level of income, shifting the LM curve to the right.

The LM Curve Will Shift to the Right If