Question

Decrease in money demand shifts the (IS/LM ) curve to the _____________ and leads to a ________________ in Y and ______________ in r.

Answer 1

LM curve will shift left and lead to decrease in Y and increase in r.

Step-by-step explanation:

When money demand decreases, it will cause LM curve to shift up to the left. There will be decrease in Fed which causes decrease in money supply. The upward shift of LM curve will lower the income and raise interest rates.