a rightward shift of the IS curve a leftward shift of the IS curve a rightward s

Question

       a rightward shift of the IS curve
       a leftward shift of the IS curve
       a rightward shift (or rotation) of the LM curve
       a leftward shift (or rotation) of the LM curve

Assume a four spending sector model where the following variables are exogenously determined: Ms, Tx, G, X; assume also that investment spending and the asset/liquidity preference demand for money are both inversely related to interest rates; that consumption is positively related to disposable income and imports are also positively related to the level of domestic income. Now assume that the Federal Reserve goes on a major bond buying binge (in normal times and under normal conditions). This would result in: (Points : 3)

Explanation / Answer

The correct answer is option (C) which is a rightward shift (or rotation) of the LM curve.

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