ZuoTi.Pro
Question

4. If the interest sensitivity of the demand for real money (the absolute inverse slope, or...

4. If the interest sensitivity of the demand for real money (the absolute inverse slope, or flatness of the demand curve for real money, b) were higher, would the absolute inverse slope of the LM curve be higher as well?

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

The inverse slope of the LM curve = (k/b).

Where, k is the income sensitivity of real demand for money.

b is the interest sensitivity of real demand for money.

If b is higher then the absolute inverse slope of the LM curve will be lower.

0 0
Add a comment
Know the answer?
Add Answer to:
4. If the interest sensitivity of the demand for real money (the absolute inverse slope, or...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • NOTE: In the following analysis we still assume that commodity prices are fixed and there is no f...

    NOTE: In the following analysis we still assume that commodity prices are fixed and there is no foreign trade. 1. What determines the demand for real money balances? Why does it depend on the nominal rather than the real interest rate? 2. What is the LM curve? 3. What determines the slope of the LM curve? 4. If the interest sensitivity of the demand for real money (the absolute inverse slope, or flatness of the demand curve for real money,...

  • The LM curve is steeper the ______ the interest sensitivity of money demand and the ______...

    The LM curve is steeper the ______ the interest sensitivity of money demand and the ______ the effect of income on money demand. a. greater; greater b. greater; smaller c. smaller; smaller d. smaller; greater

  • The slope of the aggregate demand curve is determined: a/only by the sensitivity of the IS...

    The slope of the aggregate demand curve is determined: a/only by the sensitivity of the IS curve, or short-run output, to the real interest rate. b/only by the sensitivity of short-run output to the inflation rate. c/by the sensitivity of short-run output to both inflation and the real interest rate.c/only by the sensitivity of short-run output to the inflation target. d/by the sensitivity of short-run output to the real interest rate and by the central bank sensitivity to inflation. e/by...

  • Consider the following economy with: Real Money demand 〖 (M/P)〗^d = – 12 R + 0.38 Y Real Money supply (M^s/P)= 4510 De...

    Consider the following economy with: Real Money demand 〖 (M/P)〗^d = – 12 R + 0.38 Y Real Money supply (M^s/P)= 4510 Derive the LM curve Derive the LM curve when the money supply increases by 680. Derive the LM curve when money supply decreases by 12% Compare the LM curves from a, b and c by graphing them using any graphing tool (excel preferably). Comment on the differences. Find the value of money demanded when income Y = 15,000...

  • Need help, please show work Blank options for B, E, and F are either 'steeper or flatter." Blank ...

    Need help, please show work Blank options for B, E, and F are either 'steeper or flatter." Blank options for C are "decreases in taxes or increase in govt purchases." This problem asks you to analyze the IS-LM model algebraically. First the consumption function and investment function from the goods market will be examined. Then, the money demand function from the money market will be examined. The Goods Market: Suppose consumption is a linear function of disposable income: C(Y- Ta...

  • 1. If the money demand does not depend on the interest rate, then the LM curve...

    1. If the money demand does not depend on the interest rate, then the LM curve ______. a. is horizontal b. is vertical c. shifts up to the right d. shifts down to the right 2. If money demand becomes more income elastic, the LM curve will __________. a. become flatter b. shift to the right c. become stepper d. shift to the left 3. The labour force is defined as _________. a. the total number of working age individuals...

  • if demand function for money is M/P = 0.5Y-100r, then the slope of LM curve is:...

    if demand function for money is M/P = 0.5Y-100r, then the slope of LM curve is: a 0.05 b 0.001 c 0.005 d 0.01

  • IS/LM: Use the same setup as #1, but now Investment spending is a function of the real interest r...

    IS/LM: Use the same setup as #1, but now Investment spending is a function of the real interest rate: I = 10000 – 50000r. Government purchase are now $1200b (makes for nicer numbers). Money demand in the economy is MD= (0.01Y – 800r)P + o. Assume the current money supply is $1400b, the price level/CPI is 100, and there are no money demand shocks to worry about (o = 0). a) Derive the IS curve and the LM curve for...

  • 4. If nominal money demand doubles and the real money supply also does what happens to...

    4. If nominal money demand doubles and the real money supply also does what happens to the price level ( ). The price level increases by a factor of four b. The price level doubles ). The price level is unchanged. d. The price level falls by one-half. IL Short-Answer O stiens (19 points) 5. (7 points) If the Federal Reserve sold government securities, then the money supply (increase decrease remain the same), the money he would _(increase decrease remain...

  • 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

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT