When some forms of money start to pay interest,then along with a rise in real output it takes a ________ rise in the market interest rate than before to hold the demand for money equal to its supply,which is to say that the LM curve has become ________.

Question

Quizplus · Accepted Answer

When forms of money start to pay interest, people are more willing to hold money rather than investing it. This means that a higher interest rate is needed to incentivize people to hold a certain amount of money. This results in the LM curve becoming steeper, as a larger rise in the interest rate is necessary to bring the money market back into equilibrium.

When Some Forms of Money Start to Pay Interest,then Along