An autonomous decrease in money demand,other things equal,shifts the ________ curve to the ________.
A)IS;right
B)IS;left
C)LM;left
D)LM;right

Question

Quizplus · Accepted Answer

A decrease in money demand causes people to hold less money at each level of interest rates. This leads to excess supply of money in the market, driving down interest rates. Lower interest rates encourage investment and consumption, which are represented by the IS curve shifting to the right. The LM curve, which represents the equilibrium in the money market, shifts to the right to accommodate the excess supply of money at lower interest rates. Therefore, an autonomous decrease in money demand shifts the LM curve to the right.

An Autonomous Decrease in Money Demand,other Things Equal,shifts the ________