b
Horizontal curve is a curve viewed in the x and y plane, while a vertical curve is viewed in the y plane only, or viewed from the side. Think of it like a cake. the top is the horizontal and the front is the vertical
It shifts to the left
No it does not. Only Perfectly Competitive firms have a horizontal Marginal Cost curve, which is also there demand curve.
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.
b
Horizontal curve is a curve viewed in the x and y plane, while a vertical curve is viewed in the y plane only, or viewed from the side. Think of it like a cake. the top is the horizontal and the front is the vertical
It shifts to the left
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.
No it does not. Only Perfectly Competitive firms have a horizontal Marginal Cost curve, which is also there demand curve.
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.
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.
Horizontal
The world supply curve is considered perfectly elastic.
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.
elasticity
because mc=mb