The LM Curve Slopes Upward to the Right Because

question 34

Multiple Choice

The LM curve slopes upward to the right because

• A) the demand for money plus the demand for nonmoney assets must equal the supply of money plus the supply of nonmoney assets.
• B) a higher real interest rate is associated with a higher level of the output gap in money market equilibrium.
• C) a higher real interest rate is associated with a higher level of saving in goods market equilibrium.
• D) in equilibrium the actual real interest rate must increase one-for-one with the expected real interest rate.

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Definitions:

Scarcity

The economic problem of having seemingly unlimited human wants in a world of limited resources.

Free Lunch

An idiom expressing the idea that it is impossible to get something for nothing, disputing the possibility of receiving a benefit without providing compensation.

Economic Thinking

The analytical approach to address economic problems, considering costs and benefits in decision making.

Historical Generalizations

Broad statements derived from studying patterns and trends in history, often used to explain or predict social, political, or economic phenomena.