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FSOT: 500 Test Prep Study Questions

Category - Economics

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The government of Country ABC has decided to decrease the money supply after initially achieving equilibrium in the real and financial sectors. How will this decision affect the IS-LM model?
  1. The IS curve will shift to the left
  2. The IS curve will shift to the right
  3. The LM curve will shift to the left
  4. The LM curve will shift to the right
Explanation
Answer: C - The LM curve will shift to the left.
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