Final answer:
An increase in credit card usage leads to a decrease in money demand, which corresponds to a rightward shift in the LM curve, as the central bank can reduce interest rates to maintain equilibrium in the money market.
Step-by-step explanation:
When more people use credit card for daily transactions, the money demand declines. Considering the context of macroeconomic models, this will impact the liquidity preference and money supply in the economy. The decrease in money demand means that for any given interest rate, people will hold less money because they are using credit as a substitute. In the context of the IS-LM model, a decline in money demand at any given interest rate allows the central bank to reduce the interest rate without causing inflation. This fall in interest rates shifts the LM curve to the right, which is the curve that represents the equilibrium where money supply equals money demand in the specified model.
In conclusion, an increase in credit card usage leading to a decline in money demand will have the effect of shifting the LM curve to the right, as it implies that less money is being held for transactions at every interest level, which in turn prompts the central bank to lower interest rates to maintain money market equilibrium.