Particular economy the real money demand function

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Reference no: EM131169471

In a particular economy the real money demand function is, M^d/P = 3000 + .1Y - 10,000i

Assume that M = 6000, P = 2.0 & Pie^e = .02

a. What is the real interest rate,r, that clears the asset market when Y =8000? when Y = 9000? Graph the LM Curve.

b. Repeat part a for M = 6600. How does the LM curve in thiscase compare with the LM curve in Part a.?

c. Use M = 6000 again and repeat part a for pie^e = .03. Compare the LM curve in this case with the one in part a.

Reference no: EM131169471

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