Keynes discussed the possibility of a horizontal LM curve,which causes a ________,thus the possibility of ________.
A)vertical AD curve,monetary impotence
B)vertical AD curve,an escape from monetary impotence
C)horizontal AD curve,monetary impotence
D)horizontal AD curve,an escape from monetary impotence

Question

Quizplus · Accepted Answer

A horizontal LM curve implies that the money supply is perfectly elastic, leading to monetary impotence because changes in the money supply do not affect interest rates or output, thus resulting in a vertical AD curve.

Keynes Discussed the Possibility of a Horizontal LM Curve,which Causes