Which of the Following Is True of the LM Curve

question 56

Multiple Choice

Which of the following is true of the LM curve when the nominal interest rate is on the vertical axis?

• A) The LM curve becomes downward sloping.
• B) The LM curve becomes steeper.
• C) A change in expected inflation will have no effect on the position of the LM curve.
• D) A decrease in the expected inflation rate will make the LM curve shift down.
• E) A decrease in the expected inflation rate will make the LM curve shift up.

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Definitions:

Corporate Bond Quote

The price information and yield on a corporate bond as quoted in the financial markets.

Current Yield

Current yield is the annual income (interest or dividends) earned from an investment, expressed as a percentage of the current market price of the investment.

Call Premium

The amount by which the price of a call option exceeds its intrinsic value; essentially, the extra cost for the right to buy a stock at a set price.

Early Redemption

The process of repaying a debt or obligation before its official due date, which may involve a penalty or premium.