Using the IS/LM model, a monetary policy contraction O shifts the LM curve to the left, raising interest rates and reducing national output is more effective, the larger the sensitivity of money demand to changes in the interest rate shifts the LM curve to the right, reducing interest rates and increasing national output is more effective, the steeper is the IS curve

Using the IS/LM model, a monetary policy contraction O shifts the LM curve to the left, raising interest rates and reducing national output is more effective, the larger the sensitivity of money demand to changes in the interest rate shifts the LM curve to the right, reducing interest rates and increasing national output is more effective, the steeper is the IS curve

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Using the IS/LM model, a monetary policy contraction
O shifts the LM curve to the left, raising interest rates and reducing national output
is more effective, the larger the sensitivity of money demand to changes in the interest rate
shifts the LM curve to the right, reducing interest rates and increasing national output
is more effective, the steeper is the IS curve

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