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If money demand has low sensitivity to change in interest rate,the interest rate would have to rise by a large amount to reduce the demand for real balance back to the fixed leveli.e the level at which demand for money is equal to supply of money.Accordingly,the LM curve would be quite steep
What else can I help you with?
LM curve relatively flat?
he LM curve is flat when money demand is very responsive to interest rates. That is, when you have a flat money demand curve. Interest rates only have to increase by a little in order to get rid of bonds since money demand is very reactive to interest rates.
When is the IS curve steep?
relatively low supply of high power money (monetary base low)
The economy is in short-run equilibrium a. At any point on the IS curve b. Only at a point that is on both the IS and LM curves c. At any point on the LM curve. d. Only at the natural level of?
b
What happens to the shifting of LM curve when there is an increase in demand of money?
It shifts to the left
What is-Lm approach?
The IS-LM model is an economic framework that illustrates the relationship between the goods market (Investment-Savings or IS curve) and the money market (Liquidity preference-Money supply or LM curve). The IS curve represents equilibrium in the goods market where total output (GDP) equals total spending, while the LM curve shows equilibrium in the money market where money supply equals money demand. Together, these curves help analyze the effects of fiscal and monetary policy on interest rates and economic output. The model is particularly useful for understanding short-term economic fluctuations.
LM curve relatively flat?
he LM curve is flat when money demand is very responsive to interest rates. That is, when you have a flat money demand curve. Interest rates only have to increase by a little in order to get rid of bonds since money demand is very reactive to interest rates.
When is the IS curve steep?
relatively low supply of high power money (monetary base low)
The economy is in short-run equilibrium a. At any point on the IS curve b. Only at a point that is on both the IS and LM curves c. At any point on the LM curve. d. Only at the natural level of?
b
What does a steep curve on a line graph indicate?
What does a steep looks like
What happens to the shifting of LM curve when there is an increase in demand of money?
It shifts to the left
What determines the slope of the LM curve?
The slope of the LM curve is determined by the responsiveness of the demand for money to changes in interest rates, which is influenced by the liquidity preference of individuals and businesses. Specifically, a steeper LM curve indicates that money demand is less sensitive to interest rate changes, while a flatter curve suggests greater sensitivity. Factors such as income levels, expectations about future economic conditions, and the overall liquidity of the financial system also play significant roles in shaping the slope. Ultimately, the LM curve reflects the relationship between the real money supply and interest rates in the economy.
What is-Lm approach?
The IS-LM model is an economic framework that illustrates the relationship between the goods market (Investment-Savings or IS curve) and the money market (Liquidity preference-Money supply or LM curve). The IS curve represents equilibrium in the goods market where total output (GDP) equals total spending, while the LM curve shows equilibrium in the money market where money supply equals money demand. Together, these curves help analyze the effects of fiscal and monetary policy on interest rates and economic output. The model is particularly useful for understanding short-term economic fluctuations.
Why does the LM curve have a positive slope?
The LM curve has a positive slope because as interest rates increase, the quantity of money demanded decreases. This is because higher interest rates make borrowing more expensive, leading to a decrease in investment and consumption, which in turn reduces the demand for money.
What is ls-lm?
The IS-LM model, which stands for Investment-Savings (IS) and Liquidity Preference-Money Supply (LM), is a macroeconomic framework that illustrates the relationship between real output (GDP) and interest rates in an economy. The IS curve represents equilibrium in the goods market, showing combinations of interest rates and output where investment equals savings. The LM curve represents equilibrium in the money market, indicating combinations where money supply equals money demand. Together, they help analyze the effects of fiscal and monetary policy on overall economic activity.
Why does the LM curve slope upwards?
In equilibrium: Money supply = Money demand.Summarizing it, we can explain the upward sloping LM curve as following:If income is high then thedemand for money will be high relative to the fixed supply. In order to equilibrate money demand and money supply, interest rates have to also be high to reduce money demand
Using the AD-AS framework what is the impact on equilibrium price and output when there are increase in aggregate demand and aggregate supply simultaneously?
AD-AS represents aggregate demand curve (AD) and aggregate supply curve (AS). "In the aggregate demand-aggregate supply model, each point on the aggregate demand curve is an outcome of the IS-LM model for aggregate demand Y based on a particular price level. Starting from one point on the aggregate demand curve, at a particular price level and a quantity of aggregate demand implied by the IS-LM model for that price level, if one considers a higher potential price level, in the IS-LM model the real money supply M/P will be lower and hence the LM curve will be shifted higher, leading to lower aggregate demand; hence at the higher price level the level of aggregate demand is lower, so the aggregate demand curve is negatively sloped
Does a steep learning curve mean learning fast or slowly?
Actually, it has little to do with the learner and more to do with how much there is to be learned. The steeper the learning curve, the more things one has to learn in a shorter amount of time; or the faster the increase in difficulty of the concepts to be mastered. - - - - - Additional: The metaphor "steep learning curve" originally came as a positive reference. A steep learning curve meant that one became quite proficient with a minimum amount of effort/time. It LATER came to be used in the opposite sense - as a negative reference to something difficult to learn (which actually is a shallow, not steep, curve!). A learning curve is shown as a graph of "amount of learning" in the Y axis and the "amount of time or effort" in the X direction. A relatively 'normal' learning curve would be a sloping 's' curve, with its tail starting at the lower left and progressing to the upper right where the head of the s lies. In common (technically incorrect) usage, "steep learning curve" is meant to indicate that to learn the subject/technique takes a long time and is difficult. Best 'pic' I can make with this limited editor (ignore the ·∙∙ ): Proficiency |∙ ·∙∙ ·∙∙ ___100% |·∙∙ ·∙∙ X |∙ ·∙∙ X·∙∙ ·∙∙ ·∙∙ ·∙∙ (a quick/rapid proficiency, a steep slope, = easy) |·∙∙ X |∙ X |X____________ Time Proficiency |∙∙· ∙·∙ ·∙∙ ∙∙· ∙·∙ ·∙∙ ∙∙· ∙∙· ·∙∙ ·∙∙ ·∙∙ ___100%·∙∙ ·∙∙ ·∙∙(more time reach 100%) | ∙·∙ ·∙∙ ∙∙· ∙·∙ ·∙∙ ·∙∙ ·∙∙ ·∙∙ ·∙∙ ∙∙·X | ∙·∙ ·∙∙ ∙∙· ∙·∙ ·∙∙ ·∙∙ ∙∙·X ·∙∙ ·∙∙ ·∙∙ (a slow proficiency, a gentle slope, = difficult) | ∙∙· ∙∙· ∙∙· X |X |_________________________________ Time
