?

Macroeconomics

Free Version

Upgrade subject to access all content

Easy

IS-LM Optimal Response to Money Demand Shock

MACRO-LKFXQE

If goods prices are perfectly sticky, then the response to a drop in money demand that restores the original interest rate and level of GDP is

A

an increase in the money supply.

B

an increase in the budget deficit.

C

a decrease in the money supply.

D

a decrease in the budget deficit.

E

an increase in the budget deficit and the money supply.