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LM CURVE

The demand for money is L(R,Y) = 10Y - .5R

M2 Billions CPI Interest Rate

8,400 210 4

1a. Derive the LM Curve.

1b. Find the equilibrium level of income (a number)

c. If the interest rate increases by 1%, how much does the demand for real money balances change?

3. If government spending is decreased, explain and show in the graph the new equilibrium

4. If the money supply is decreased, explain, and show in the graph the new equilibrium.

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Chika Ilonah
Chika IlonahLv10
28 Sep 2019

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