Determine whether each of the following statements is true or false, and explain why. For each true statement, discuss the impact of monetary and fiscal policy in that special case. a) If money demand does not depend on income, the LM curve is horizontal. b) If money demand is extremely sensitive to the interest rate, the LM curve is horizontal.
Determine whether each of the following statements is true or false, and explain why. For each true statement, discuss the impact of monetary and fiscal policy in that special case. a) If money demand does not depend on income, the LM curve is horizontal. b) If money demand is extremely sensitive to the interest rate, the LM curve is horizontal.
Chapter16: Monetary Policy
Section: Chapter Questions
Problem 8SQ
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Determine whether each of the following statements is true or false, and explain why. For each true statement, discuss the impact of monetary and fiscal policy in that special case.
a) If money demand does not depend on income, the LM curve is horizontal.
b) If money demand is extremely sensitive to the interest rate, the LM curve is horizontal.
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