Decrease in money supply shift the LM curve to the:
A)right
B)left
C)no change
D)any of these.

Question

Quizplus · Accepted Answer

A decrease in the money supply reduces the amount of money available for lending, which increases interest rates. Higher interest rates reduce investment and consumption, which shifts the LM curve to the left. The LM curve represents the relationship between liquidity (money supply) and money demand at different levels of income and interest rates in the economy.

Decrease in Money Supply Shift the LM Curve to The