An autonomous rise in _ shifts the LM curve to the _, everything else held constant

Economics Dec 14, 2020

An autonomous rise in _____ shifts the LM curve to the _____, everything else held constant.

a) net exports; right,

b) net exports; left,

c) money demand; right,

d) money demand; left.

Expert Solution

The correct option is d) money demand; left.

Explanation:

LM curve is used to the graphical depiction of the money market when making the interaction between the money market and goods market. Lm curve is directly related to money supply and inversely related to money demand. A rise in autonomous money demand will result in an increase in the interest rate due to which people are discouraged from making more demand as they have to pay higher interest payment. As a result, money circulation decreases in the economy. Hence, an increase in money demand leads to shifts in the LM curve to the left as it increases interest rate in the economy.

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote