The liquidity and money (LM) curve has
A) a positive slope showing that the money market is in equilibrium at a higher interest rate when national income is higher.
B) a negative slope showing that the money market is in equilibrium at a lower interest rate when national income is higher.
C) a positive slope showing that the money supply is positively related to national income.
D) a negative slope showing that the money supply is negatively related to national income.

Question

Quizplus · Accepted Answer

The LM curve has a positive slope because, in the money market, higher national income leads to higher demand for money, which results in higher interest rates to maintain equilibrium.

The Liquidity and Money (LM) Curve Has