Other things equal, if the if the demand for money becomes more elastic, then the LM Curve will become __________, i.e., a given rise in the interest rate will, in order for Money market equilibrium to be preserved, be associated with a __________ rise in Income.
A) less elastic; smaller
B) less elastic; larger
C) more elastic; smaller
D) more elastic; larger

Question

Quizplus · Accepted Answer

If the demand for money becomes more elastic, the LM curve becomes flatter. This means that for a given rise in the interest rate, a larger increase in income is needed to maintain money market equilibrium.

Other Things Equal, If the If the Demand for Money