Suppose That the RBA Raises the Current Interest Rate by Decreasing

question 40

Multiple Choice

Suppose that the RBA raises the current interest rate by decreasing the money supply, with no other policy change implemented or anticipated. Which of the following shifts in the IS and/or LM curves will take place in the current period?

• A) no shift in IS; LM up.
• B) IS right; LM down.
• C) IS left; LM up.
• D) IS left; LM down.
• E) IS right; LM up.