Real money
supply, MS

Real interest rate, r

Real interest rate, r

  Real money supply, M/P,
and real money demand, M^d/P

Output, Y

LM Curve

Level of output, Y

Asset market equilibrium

Shifts in the LM Curve

Shifts in LM curve

Factors that shifts the LM curve via changing real 
money supply relative to real money demand

1. Change in nominal money supply
2. Change in price level, P
3. Change in expected inflation, E[n]
4. Change in nominal interest rate on money, i
5. Change in wealth
6. Change in liquidity preference

j = -0.02 (slider from -0.6 to 0.6, step 0.02)
g = 4020 (slider from 4000 to 5200, step 20)
t: (g - 4000) / 1000
A = Intersect(xAxis, yAxis)
B = (6, 0)
a = Segment(A, B)
C = Point(xAxis)
D = (13, 0)
b = Segment(C, D)
E = Point(yAxis)
c = Segment(A, E)
F = (3, 0)
G = (3, 6)
d = Segment(F, G)
H = (7, 7)
e = Segment(C, H)
f = If(1 + t + j < x < 5.5 + t + j, 5 / (x - t - j)^(0.75))
I = Intersect(f, d, (3, 2.1934566882541544))
J: (0, y(I))
K: (8 + t, y(I))
h = Segment(J, K)
s: (t + 0.72) / 0.24
L = Intersect(e, h)
M: (5 + t, f(5 + t))
text1: "" + s + "%"
text2: "" + s + "%"
text3: "(" + g + "," + s + "%)"
N: (x(K), 0)
i = Segment(K, N)
text4: "Y=" + g + ""
text5: "Real money demand, MD
      when (Y=" + g + ")"