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If the demand function for money is m/p = 0.5y – 100r, then the slope of the lm curve is:
A) 0.001.
B) 0.005.
C) 0.01.
D) 0.05.

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Divya Singh
Divya SinghLv10
26 Sep 2020

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Related questions

1. 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 LM curve two ways, expressing Y as a function of r and r as a function of Y. (Hint: Write the LM curve only relating Y and r; substitute out M/P.)

b. What is the slope of the LM curve?

c. If r is 1 percent, what is Y along the LM curve? If r is 3 percent, what is Y along the LM curve? If r is 5 percent, what is Y along the LM curve?

d. If M/P increases, does the LM curve shift upward and to the left or downward and to the right?

e. If P increases and M is constant, does the LM curve shift upward and to the left or downward and to the right?

 

Assume that the economy is characterized by the following equations:

Derive the IS, LM equations. Calculate the equilibrium Y and r.

If = 14000, is the economy in recession or expansion? If the objective of policymakers is to keep the economy at its natural output level and have a balanced budget, which combination of policies would be needed? Illustrate and explain.

C=1000+0.6(Y-T)

T=1500

G=2000

I=1100-100r

L(r,Y)=1000+0.5Y-500r

M(s)=12000

P=2

Consider the Following Economy:

Y = (C + I + G + NX) <-Income Identity

C = 300*0.8YD<-Consumption

I = 200-1500r <-investment

NX = 100-0.04Y-500r <-net exports

M^d = (0.5Y-2000r) <-Money Demand

G = 1200

t (tax rate) = 0.2

Money Supply (M^s) = $550

P = $1

a. What is the IS Curve?

b. What is the LM Curve?

c. What are the values of Y (income) and interest rate (r) when the IS-LM model is in equilibrium?

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