In deriving the LM curve, we assumed that money demand was negatively related to the interest rate. Suppose instead that money demand depends only on the real value of transactions, Y . Draw the money demand curve for this case. What does the LM curve look like if money demand has this property? Explain. (Note: If money demand is independent of the interest rate, then we have the quantity theory of money from Chapter 4).

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In deriving the LM curve, we assumed that money demand was negatively related to the interest rate. Suppose instead that money demand depends only on the real value of transactions, Y . Draw the money demand curve for this case. What does the LM curve look like if money demand has this property? Explain. (Note: If money demand is independent of the interest rate, then we have the quantity theory of money from Chapter 4).

 

In deriving the LM curve, we assumed that money demand was negatively related to the interest rate. Suppose instead that money demand depends only on the real value of transactions, Y . Draw the money demand curve for this case. What does the LM curve look like if money demand has this property? Explain. (Note: If money demand is independent of the interest rate, then we have the quantity theory of money from Chapter 4).

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In deriving the LM curve, we assumed that money demand was negatively related to the interest rate. Suppose instead that money demand depends only on the real value of transactions, Y . Draw the money demand curve for this case. What does the LM curve look like if money demand has this property? Explain. (Note: If money demand is independent of the interest rate, then we have the quantity theory of money from Chapter 4).

 

In deriving the LM curve, we assumed that money demand was negatively related to the interest rate. Suppose instead that money demand depends only on the real value of transactions, Y . Draw the money demand curve for this case. What does the LM curve look like if money demand has this property? Explain. (Note: If money demand is independent of the interest rate, then we have the quantity theory of money from Chapter 4).

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