Figure 4-6
-In the figure above, with IS0 shifting to IS1 against the upward-sloping LM curve, at point 1
A) there is an excess demand for money.
B) there is an excess supply of money.
C) the demand for output exceeds Y1.
D) the demand for output is below Y1.

Question

Figure 4-6 
-In the figure above, with IS0 shifting to IS1 against the upward-sloping LM curve, at point 1
A) there is an excess demand for money. 
B) there is an excess supply of money. 
C) the demand for output exceeds Y1. 
D) the demand for output is below Y1.

Quizplus · Accepted Answer

When the IS curve shifts to the right from IS0 to IS1, it indicates an increase in income and output, leading to higher demand for money. If the LM curve is upward-sloping, at point 1, the interest rate is lower than the new equilibrium, causing an excess demand for money.

Figure 4-6 -In the Figure Above, with IS0 Shifting to IS1 Against