For each of the following changes, which equilibrium curve (IS, LM, or FE) is shifted? Draw the change in the underlying demand or supply curves (for example, money demand and supply for the LM curve) and show how the equilibrium curve changes.(a)Expected inflation increases.(b)The future marginal productivity of capital increases.(c)Labor supply decreases.(d)Future income declines.(e)There's a temporary beneficial supply shock.(f)The nominal interest rate on money rises.
What will be an ideal response?
| (a) | LM shifts down and to the right. |
| (b) | IS shifts up and to the right. |
| (c) | FE shifts left. |
| (d) | IS shifts down and to the left. |
| (e) | FE shifts right. |
| (f) | LM shifts up and to the left. |
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What will be an ideal response?
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