Advanced Macro & Growth · intro
What moves on the IS-LM diagram
Monetary expansion shifts LM right: output rises while the interest rate falls, the opposite rate effect to fiscal policyfiscal policyGovernment spending and tax decisions used to influence the macroeconomy..
Start at equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change..
More money at every income level shifts LM down/right.
Rates fall and output rises, monetary policymonetary policyCentral-bank control of interest rates or the money supply to steer inflation and output. moves the economy WITHOUT crowding outcrowding outWhen government borrowing raises interest rates and squeezes out private investment.. That asymmetry is the policy-mix debate.
Examiners ask this as: monetary easing islm, lm shifts right.
Other scenarios on IS-LM