If the financial innovations such as ATM machines make money demand less elastic than it was before,then
A)the LM curve will become steeper.
B)the LM curve will become flatter.
C)both the IS and LM curves will become flatter.
D)the LM curve will shift to the left.

Question

Quizplus · Accepted Answer

When the demand for money becomes less elastic due to financial innovations like ATM machines, it means that people's demand for money becomes less sensitive to changes in interest rates. As a result, the LM curve, which represents the relationship between the interest rate and the level of income in the market for money, will become steeper. This is because a given change in the interest rate will now result in a smaller change in the quantity of money demanded than before.

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