A decline in the money supply shifts the LM curve to the left,causing the interest rate to ________ and output to ________,everything else held constant.
A)rise;rise
B)rise;fall
C)fall;rise
D)fall;fall

Question

Quizplus · Accepted Answer

A decline in the money supply shifts the LM curve to the left, leading to an increase in interest rates as the money becomes scarcer and more expensive to borrow. This, in turn, reduces investment and consumption, causing output to fall.

A Decline in the Money Supply Shifts the LM Curve