Question

d.
b. How does the increase affect the equilibrium level of income?
c. How does the increase affect the equilibrium interest rate?
Chou that a niyen change in the money stock has a larger effect​

Answer 1

Answer:

Hello mate

Explanation:

1. Income level will increase from Y1 to Y2 but interest rate remains unaffected. ADVERTISEMENTS: Effect of shift in LM curve on the equilibrium income level: An expansionary monetary policy brought by an increase in money supply with price level constant will lead to shift in LM curve to the right.

2. If the Fed increases the money supply, the supply curve shifts to the right and the equilibrium interest rate falls. Likewise, if the Fed decreases the money supply, the supply curve shifts to the left and the equilibrium interest rate will rise. The equilibrium rate of interest will increase from i1* to i2*.