An unanticipated increase in the money supply would
A)shift the LM curve to the right and the AD curve up and to the right.
B)shift the LM curve to the left and the AD curve up and to the right.
C)shift the LM curve to the right and the AD curve down and to the left.
D)shift the IS curve to the right and the AD curve up and to the right.

Question

Quizplus · Accepted Answer

An unanticipated increase in the money supply would shift the LM curve to the right, as there would be an increase in the supply of money available to borrowers. This would cause a decrease in the interest rates, which in turn would stimulate investment and consumption spending. Consequently, the aggregate demand (AD) curve would shift up and to the right, reflecting the increase in the overall level of spending in the economy. Therefore, option A is the correct answer.

An Unanticipated Increase in the Money Supply Would