Question

Contractionary monetary policy causes the (LM,IS)to shift (left,right)and the (LRAS,AD,SRAS) to shift (right up,left down)

Please pick one for each bracket

Answer 1

Contractionary monetary policy causes the LM to shift left and the AD to shift left down.

A change in monetary policy impacts the asset market at first, thus causing a shift of the LM curve. Contractionary monetary policy moves the LM curve to the left, lowering income and raising interest rates.

Any action which shifts the IS or LM curves also shifts the AD curve, which is derived from the IS-LM equilibrium points. The AD curve shifts in the same direction as the IS and LM curves.