Given the following scenarios, match the scenario with the appropriate effect on the IS-LM model:

Economic Situations How IS or LM curves react

(A) The central bank decides to implement an open market sale of bonds. (1) The IS curve shifts to the right, indicating an increase in the demand for goods at every interest rate level.

(B) There is an increase in private investment due to favourable market conditions. (2) The LM curve shifts to the right, indicating an increase in the supply of money at every interest rate level.

(C) The government decides to decrease government spending. (3) The IS curve shifts to the left, indicating a decrease in the demand for goods at every interest rate level.

(D) An increase in the demand for money due to rapid economic growth. (4) The LM curve shifts to the left, indicating a decrease in the supply of money at every interest rate level.

Question

Economic Situations	How IS or LM curves react
(A) The central bank decides to implement an open market sale of bonds.	(1) The IS curve shifts to the right, indicating an increase in the demand for goods at every interest rate level.
(B) There is an increase in private investment due to favourable market conditions.	(2) The LM curve shifts to the right, indicating an increase in the supply of money at every interest rate level.
(C) The government decides to decrease government spending.	(3) The IS curve shifts to the left, indicating a decrease in the demand for goods at every interest rate level.
(D) An increase in the demand for money due to rapid economic growth.	(4) The LM curve shifts to the left, indicating a decrease in the supply of money at every interest rate level.