If Money Demand Becomes More Income Elastic, Then the LM-Curve

question 50

Multiple Choice

If money demand becomes more income elastic, then the LM-curve will

• A)shift parallel to the right
• B)shift parallel to the left
• C)become steeper
• D)become flatter
• E)become flatter and shift to the right

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Definitions:

Marginal Utility

is the added satisfaction or benefit a consumer gets from consuming one additional unit of a good or service.

Utility-Maximizing Rule

The principle that to obtain the greatest total utility, a consumer should allocate money income so that the last dollar spent on each good or service yields the same marginal utility (MU). For two goods X and Y, with prices Px and Py, total utility will be maximized by purchasing the amounts of X and Y such that MUx/Px = MUy/Py for the last dollar spent on each good.

Budget Constraint

The limitations on the consumption choices of an individual or family due to limited financial resources.

Product Alpha

A term often used to define the first version or iteration of a product, typically before it is released to the general public for feedback.