The Slope of an LM Curve

question 11

Multiple Choice

The slope of an LM curve

• A) gets steeper the more responsive the demand for money is to changes in GDP.
• B) gets flatter the more responsive the demand for money is to changes in the interest rate.
• C) is invariant, in the simple case at least, to small changes in the price level.
• D) is invariant to policy shifts in the supply of money, unless the sensitivity of the demand for money to changes in GDP or interest rates is affected.
• E) all of the above.

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Definitions:

Limit Switch

A limit switch is a device used to detect the physical presence or position of an object, often used to control machinery and ensure operations within safe bounds.

Loanable Funds

The money available for borrowing. The market for loanable funds is where borrowers and lenders interact, determining the market interest rate.

Interest Rate

The percentage charged on borrowed money, paid by the borrower to the lender, or earned through deposit or investment, typically expressed on an annual basis.

Loanable Funds

The supply of capital available for borrowing, influenced by interest rates and financial markets, which facilitates investments and purchases.