Exhibit: IS-LM Monetary Policy Based on the Graph, Starting

question 4

Multiple Choice

Exhibit: IS-LM Monetary Policy Based on the graph, starting from equilibrium at interest rate r₁ and income Y₁, an increase in the money supply would generate the new equilibrium combination of interest rate and income:

• A)r₂, Y_2.
• B)r₃, Y_2.
• C)r₂, Y_3.
• D)r₃, Y_3.

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Definitions:

Market Economy

An economic model where the decisions on investment, production, and distribution rely on market forces like supply and demand, leading to the determination of goods and services prices through a system free from price controls.

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