Consider a standard Keynesian economy. Which shock would cause the slope of the money demand curve...
Consider a standard Keynesian economy. Which shock would cause the slope of the money demand curve to become steeper?
A. Money demand becomes less sensitive to changes in the interest rate
B. Money demand becomes more sensitive to changes in the interest rate
C. Money demand becomes more sensitive to changes in the output
D. Money demand becomes less sensitive to changes in the output
Homework Answers
A steeper money demand curve means that the money demand will be less affected by the interest rate in the market. i.e. if the interest rate increase or decrease the money demand remains the same.
The answer is "A", Money demand becomes less sensitive to change in interest rate.
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