What would drive interest rates in such an environment

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Reference no: EM13192503

a) How would a regular LM curve be affected if the private sector demand for money balances increased following heightened uncertainty about prospects for bonds?

b) what would an LM curve look like in a Quantity Theory world where velocity is fixed and is not impacted by interest rates (that is, M=kPY)? what do you think would drive interest rates in such an environment?

Reference no: EM13192503

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