Suppose the intersection of the IS and LM curves is to the right of the FE line.What would most likely eliminate a disequilibrium among the asset,labor,and goods markets?
A)A rise in the price level, shifting the LM curve up and to the left.
B)A fall in the price level, shifting the LM curve down and to the right.
C)A rise in the price level, shifting the IS curve up and to the right.
D)A fall in the price level, shifting the IS curve down and to the left.

Question

Quizplus · Accepted Answer

A rise in the price level would increase the demand for money, shifting the LM curve up and to the left, which could move the intersection point closer to the FE line, helping to eliminate disequilibrium.

Suppose the Intersection of the IS and LM Curves Is