3. Why does LM curve slope upwards ? 4. Why does IS curve slope downward ?
3. Why does LM curve slope upwards ?
4. Why does IS curve slope downward ?
Homework Answers
3.
LM curve is upward slopped because of the following reason:
If demand for money increases it increases the interest rate (r), since supply is limited in the short-run; income would be high because of earning higher interest. Therefore, income rises along with interest rises; makes the curve upward slopped.
4.
IS curve is downward slopped because of the following reasons:
1) Investment (I) and interest rate (r) have inverse relationship and investment is a function of Y.
2) Saving (S) is a function of Y, because saving increases as Y increases. Planned saving should equal to planned investment in the IS model.
Add Answer to:
3. Why does LM curve slope upwards ?
4. Why does IS curve slope downward ?
1. Explain why the aggregate demand (AD) curve is downward slopping (on the two dimensional price...
1. Explain why the aggregate demand (AD) curve is downward slopping (on the two dimensional price and output planes) in the neoclassical ASAD model. 2. Explain why the aggregate demand (AD) curve is downward slopping (on the two dimensional price and output planes) in the Post-Keynesian ASAD model. 3-4. In the neoclassical ASAD model, let us suppose that the interest rate has no effect on investment. What does this imply for (1) the slope of the IS curve, for (2)...
7. A downward-sloping investment function yields a falling IS curve, but a downward-sloping demand for real money balance curve yields a rising LM curve. Why?
7. A downward-sloping investment function yields a falling IS curve, but a downward-sloping demand for real money balance curve yields a rising LM curve. Why?
Explain in detail why the aggregate demand curve slopes downward in the standard IS-LM model. Then...
Explain in detail why the aggregate demand curve slopes downward in the standard IS-LM model. Then explain why the Long-run Aggregate Supply Curve is vertical.
12) In the IS-LM Model, assuming a downward sloping IS curve and an upward sloping LM...
12) In the IS-LM Model, assuming a downward sloping IS curve and an upward sloping LM curve; an increase in consumer wealth is going to A) cause a rightward shift of the IS curve. B) cause a rightward shift of the LM curve. C) cause a movement along the IS curve D) cause a leftward shift of the LM curve.
Exercise 4. The slope of the AS curve. a) Why does the AS curve slope upward?...
Exercise 4. The slope of the AS curve. a) Why does the AS curve slope upward? b) If the AS curve were more steeply sloped, how would the economy respond differently to aggregate demand shocks (shocks to a)? aggregate supply shocks (shocks to 5)? sloped? c) If the curve were more steeply sloped, how would the economy respond differently to d) What kind of economic changes in the economy would lead the curve to be more steeply
Financial markets and the LM relation. a) Explain why the money demand curve is downward sloping...
Financial markets and the LM relation. a) Explain why the money demand curve is downward sloping and what b) What types of policies can the central bank implement to reduce the interest c) Define the velocity of money. What effect does an increase in interest rate d) Illustrate graphically the effect of a drop in nominal income on the money e) Illustrate graphically the effect of a purchase of bonds by the Federal Reserve factor(s) cause shifts in the money...
a) Briefly, explain what the IS curve and the LM curve represent. b) Explain the reason...
a) Briefly, explain what the IS curve and the LM curve represent. b) Explain the reason that determines the slope of the IS curve and the factors that would make the IS curve steeper. c) Explain the reason that would determine the slope of the LM curve and outline what would shift the curve to the right. d) Use an IS-LM diagram to illustrate and explain why the interest rate is likely to decline during an economic contraction that is...
why does the AVC curve eventually slope up?
why does the AVC curve eventually slope up?
f. If P increases and M is constant, does the LM curve shit upward and to...
f. If P increases and M is constant, does the LM curve shit upward and to the left or downward and to the right? 2. IS-LM Model (20 points) Assume that an economy is characterized by the following equations T 600; G 500, 1-800-(50/3)r, M 1200, P M0.SY-50 (1) write the IS curve for the economy, expressing Y as a function of r· (3 points) (2). Write the LM curve for the economy, expressing r as a function of Y....
What is the current slope of the treasury yield curve? Flat, upward or downward? please explain...
What is the current slope of the treasury yield curve? Flat, upward or downward? please explain why.
1. Explain why the aggregate demand (AD) curve is downward slopping (on the two dimensional price and output planes) in the neoclassical ASAD model. 2. Explain why the aggregate demand (AD) curve is downward slopping (on the two dimensional price and output planes) in the Post-Keynesian ASAD model. 3-4. In the neoclassical ASAD model, let us suppose that the interest rate has no effect on investment. What does this imply for (1) the slope of the IS curve, for (2)...
12) In the IS-LM Model, assuming a downward sloping IS curve and an upward sloping LM curve; an increase in consumer wealth is going to A) cause a rightward shift of the IS curve. B) cause a rightward shift of the LM curve. C) cause a movement along the IS curve D) cause a leftward shift of the LM curve.
Exercise 4. The slope of the AS curve. a) Why does the AS curve slope upward? b) If the AS curve were more steeply sloped, how would the economy respond differently to aggregate demand shocks (shocks to a)? aggregate supply shocks (shocks to 5)? sloped? c) If the curve were more steeply sloped, how would the economy respond differently to d) What kind of economic changes in the economy would lead the curve to be more steeply
Financial markets and the LM relation. a) Explain why the money demand curve is downward sloping and what b) What types of policies can the central bank implement to reduce the interest c) Define the velocity of money. What effect does an increase in interest rate d) Illustrate graphically the effect of a drop in nominal income on the money e) Illustrate graphically the effect of a purchase of bonds by the Federal Reserve factor(s) cause shifts in the money...
f. If P increases and M is constant, does the LM curve shit upward and to the left or downward and to the right? 2. IS-LM Model (20 points) Assume that an economy is characterized by the following equations T 600; G 500, 1-800-(50/3)r, M 1200, P M0.SY-50 (1) write the IS curve for the economy, expressing Y as a function of r· (3 points) (2). Write the LM curve for the economy, expressing r as a function of Y....
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