Clearly explain the derivation of the LM curve. In your explanation, you should distinguish between the traditional, positive-sloping LM curve and the modern horizontal LM curve. No graphs are required
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Clearly explain the derivation of the LM curve. In your explanation, you should distinguish between the traditional, positive-sloping LM curve and the modern horizontal LM curve. No graphs are required. |
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- What are the implications of IS and LM curves? What are the factors on which the position and the slope of IS and LM curves depend?What is the LM curve and why does is it positively slope? Explain the factors which can shift the LM curve.State the relationship between the LAC curve and the LMC in economics!
- Assume that the average or mean monthly household consumption expenditure for Malaysia rose from RM3,578 in 2018 to RM4,033 in 2020, growing 6% per annum at nominal value, according to the statistics department. However, in terms of real value — which refers to the constant price using the Consumer Price Index with the base year 2014 as the deflator — annual growth rate is 3.9% for the same period, mentioned on its Household Expenditure Survey Report 2020. a) Suppose that consumer spending initially rises by RM5 billion for every 1 percent rise in household wealth and that investment spending initially rises by RM20 billion for every 1 percentage point fall in the real interest rate. Also, assume that the economy’s multiplier is 4. i. If household wealth falls by 5 percent because of declining house values, and the real interest rate falls by two percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? ii. In what…Clearly explain the derivation of the LM curve.distinguish between the traditional, positive-sloping LM curve and the modern horizontal LM curve.Assume that the average or mean monthly household consumption expenditure for Malaysia rose from RM3,578 in 2018 to RM4,033 in 2020, growing 6% per annum at nominal value, according to the statistics department. However, in terms of real value — which refers to the constant price using the Consumer Price Index with the base year 2014 as the deflator — annual growth rate is 3.9% for the same period, mentioned on its Household Expenditure Survey Report 2020. b) i. Use the aggregate expenditures model to show how government fiscal policy could eliminate either a recessionary expenditure gap or an inflationary expenditure gap. ii. Explain how equal-size increases in G and T could eliminate a recessionary gap and how equal-size decreases in G and T could eliminate an inflationary gap.