If money demand relative to the level of real output is constant then,the slope of the AD curve is
A)steeper the steeper the slope of the LM curve.
B)flatter the flatter the slope of the LM curve.
C)steeper the flatter the slope of the LM curve.
D)horizontal if the LM curve is vertical.

Question

Quizplus · Accepted Answer

The slope of the Aggregate Demand (AD) curve is influenced by the slope of the Liquidity Preference-Money Supply (LM) curve in the opposite direction. If the LM curve is flatter, indicating a more responsive demand for money to interest rate changes, it leads to a steeper AD curve because changes in interest rates have a larger impact on aggregate demand.

If Money Demand Relative to the Level of Real Output