In the is–lm model when m/p rises, in short-run equilibrium, in the usual case the interest rate ______ and output ______.

In the IS-LM model, when M/P (the real money supply) rises, in short-run equilibrium, the usual case is that the interest rate falls and output increases.

The IS-LM model is a macroeconomic model that combines the goods market (IS) and the money market (LM) to determine equilibrium interest rates and output (GDP).

- IS Curve: Represents the goods market, and it is downward sloping. An increase in interest rates typically reduces investment and hence aggregate demand, which in turn reduces output. - LM Curve: Represents the money market, and it is upward sloping. When real money supply (M/P) increases, for a given level of prices (P), there is more money available relative to the demand. This excess supply of money leads to a lower equilibrium interest rate to encourage borrowing and spending.

When M/P increases (either due to an increase in the nominal money supply M or a decrease in the price level P), the LM curve shifts to the right. This shift indicates that at each level of income, a lower interest rate is now needed to equilibrate the money market because there is more money available and people are willing to hold money at lower interest rates.

As the LM curve shifts to the right, the new equilibrium is found at the intersection of the new LM curve and the unchanged IS curve. In the usual case, this results in a lower interest rate and higher level of output, as businesses invest more due to the cheaper borrowing costs and consumers may also increase spendin