Question

Match the specified effect on the LM curve with the appropriate cause A monetary policy that shifts the LM curve right a monetary policy that creates a flat LM curve a monetary policy that shifts the LM curve left A vertical LM curve A. increase in the money supply B. Interest rate target C. reduction in the money supply D. zero interest elasticity of money demand (The classical version of LM)

Answer 1

Step-by-step explanation:

A monetary policy that shifts the LM curve right produces an increase in the money supply.

A monetary policy that creates a flat LM curve - interest rate target, as the interest rate remains constant.

A monetary policy that shifts the LM curve left - reduction in the money supply.

A vertical LM curve - zero interest elasticity of money demand, that is, there is no impact of change in interest rate.