Solved

Assume That the Equilibrium in the Money Market May Be LML M

Question 113

Essay

Assume that the equilibrium in the money market may be described as M/P = 0.5Y - 100r, and M/P equals 800.

a. Write the LML M curve two ways, expressing YY as a function of rr and rr as a function of YY . (Hint: WW rite the LML M curve only relating YY and rr , substitute out MPM P .)
b. What is the slope of the LML M curve?
c. If rr is 1 percent, what is YY al ong the LML M curve? If rr is 3 percent, what is YY al ong the LML M curve? If rr is 5 percent, what is YY al ong the LML M curve?
d. If M/PM / P increases, does the LML M curve shift upward and to the left or downward and to the right?
e. If MM increases and PP is constant, does the LML M curve shift upward and to the left or downward and to the right?
f. If PP increases and MM is constant, does the LML M curve shift upward and to the left or downward and to the right?

Correct Answer:

verifed

Verified

a. blured image, or blured image.
b. The slope of the blured image curve is ...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents