If the combination r = 6% and Y = $500 billion is on the LM curve, we know that the combination r = 4% and Y = $500 billion would represent
A) the Fed rule shifting to the right.
B) the Fed rule shifting to the left.
C) a movement up the Fed rule.
D) a movement down the Fed rule.

Question

Quizplus · Accepted Answer

A decrease in the interest rate from 6% to 4% at the same level of income ($500 billion) suggests an expansionary monetary policy, which would shift the Fed rule to the right.

If the Combination R = 6% and Y = $500