An Increase in Money Supply Shifts the LM Curve to the Right

question 77

Essay

An increase in money supply shifts the LM curve to the right, but an increase in money demand shifts the LM curve to the left. Explain why there is a difference.

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Definitions:

Principal

The original sum of money borrowed in a loan or invested, excluding any interest or dividends.

Debt-To-Equity Ratio

A metric revealing the comparative use of shareholders' equity and debt to finance a company's assets.

Total Liabilities

The sum of all financial obligations a company owes to outside parties, including both current and long-term debts.

Stockholders' Equity

The owners' residual claim on a company's assets after deducting liabilities, often represented as share capital plus retained earnings.