Monetary Policy: an increase in M 1.△M>0 shifts the ly curve down (or to the right) 2 2. .causing the 1 interest rate to fall 3.∴ Which increases investment, causing output income to rise CHAPTER 11 Aggregate Demand Il slide 5CHAPTER 11 Aggregate Demand II slide 5 2. …causing the interest rate to fall IS Monetary Policy: an increase in M 1. M > 0 shifts the LM curve down (or to the right) Y r LM1 r1 Y1 Y2 r2 LM2 3. …which increases investment, causing output & income to rise