1) The Fed does easy money policy. As a result, the a. interest rate rises and...

Question

Question

1) The Fed does easy money policy.

As a result, the

a. interest rate rises and the LM curve shifts left

b. interest rate falls and the LM curve shifts left

c. interest rate rises and the LM curve shifts right

d. interest rate falls and the LM curve shifts right

Answer 1

Answer #1

Option D.

When the Fed does easy money policy, the interest rate falls and the LM curve shifts right.
Fed does an easy money policy to increase the money supply in the economy and to increase the reserve's within an economy.
This will decrease the amount of interest paid by the customer's as the interest rates fall. As a result, the LM curve shift to the right when money supply Increases.

Answer 2

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