What causes a shift in the LM curve?

A shift in the LM curve occurs when there is a change in the money supply or the aggregate demand for money, which in turn affects the equilibrium between the money market and the goods market in an economy. A shift to the right of the LM curve occurs when there is an increase in the money supply or a decrease in the demand for money. This can be caused by actions taken by the central bank, such as open market operations or changes in the reserve requirements. On the other hand, a shift to the left of the LM curve occurs when there is a decrease in the money supply or an increase in the demand for money. This can be caused by factors such as an increase in bank lending or an increase in precautionary saving by households. These shifts in the LM curve have important implications for interest rates and output levels in an economy.

This mind map was published on 18 September 2023 and has been viewed 102 times.