Based on your understanding of the IS-LM model, graphically illustrate and explain what effect a monetary expansion will have on output, the interest rate, and investment
What will be an ideal response?
An increase in M will cause the LM curve to shift down and the interest rate to fall. As the interest rate falls, firms will increase investment causing an increase in demand and subsequent increase in output. So, the interest rate will fall and Y will rise. I will be higher due to the rise in Y and drop in the interest rate.
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National income =
A) Consumption - Saving +Taxes B) Consumption - Saving - Taxes C) Consumption + Saving + Taxes D) Consumption + Saving - Taxes
If a firm hires lazy employees,
A) it must pay them differently or hard-working employees will engage in moral hazard. B) it must pay them more or hard-working employees will engage in moral hazard. C) it must fire them before their laziness spreads to hard-working employees. D) the lazy employees make hard-working employees look good.