It can be shown using the IS-LM-FX model that a temporary expansion in the supply of money is effective in:
A) raising rates of interest.
B) raising the rate of unemployment.
C) combating temporary downturns in the economy.
D) increasing consumer confidence.

Question

Quizplus · Accepted Answer

In the IS-LM-FX model, a temporary expansion in the money supply shifts the LM curve to the right. This leads to lower interest rates and higher output, thus combating temporary downturns in the economy. Option A is incorrect as it is the opposite of what happens in the model. Option B and D are unrelated to the effects of a temporary expansion in the supply of money.

It Can Be Shown Using the IS-LM-FX Model That a Temporary