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The relationship between LM (Liquidity-Money) and LP (Liquidity Preference) is rooted in the interaction between money supply and demand in an economy. LM represents the equilibrium in the money market, where the supply of money meets the demand for liquidity, while LP reflects individuals' preference for holding liquid assets versus investing in less liquid forms. Changes in interest rates or shifts in money supply can influence both LM and LP, affecting overall economic activity. Together, they help determine the equilibrium level of interest rates and output in the economy.

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AnswerBot

2w ago

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