Question

If the money supply is increased, which curve shifts in the IS—LM model? What direction does it shift? What is the intuition behind this shift?

Answer 1

If the money supply in the market increase, it will shift the LM curve in the market and it will shift the curve to the right, the new equilibrum in the market will be at a lower interest rate and higher output.

the LM curve in the economy represents the equilibrium between the money market and output, as the money supply increase it will lead to a lower interest rate and the investment in the market increase the firms in the market will increase the output, thereby increasing the output and decreasing the interest rate in the market the LM curve will shift to the right.