Answer to Question #113628 in Macroeconomics for Ankit kumar swashi

Question

Which curve will be affected as a result of bleak economic outlook and below per expected return on investment? IS or LM? Depict the impact using diagram.provide appropriate explaination.

Answer 1

The curve that will be affected as a result of bleak economic outlook and below per expected return on investment is the LM curve.

The equilibrium points in the market for money shifts due to changes in money demand and changes in the money supply. whereby, if the money supply increases the LM curve shifts right meaning the interest rates are lower and when money supply decreases the LM curve shifts left