Suppose We Have an Initial Equilibrium with Curves IS0 and LM0

question 51

Multiple Choice

Suppose we have an initial equilibrium with curves IS0 and LM0. The price level then falls. At every point on LM0 there is now an excess ________ real balances, which is eliminated at each income level by a ________ in the interest rate, meaning that the new LM curve is ________ LM0.

• A) demand for, fall, above
• B) demand for, fall, below
• C) demand for, rise, above
• D) supply of, rise, above
• E) supply of, fall, below

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Definitions:

Ultimate Consumers

The final users of a product or service, typically individuals who purchase goods for personal use rather than for resale or further production.

Household

A living arrangement in which an individual or group of people residing at the same address share domestic responsibilities.

Organizational Buyers

Organizational Buyers are entities like companies, governments, and institutions that purchase goods or services for use in production processes, for resale, or for operational needs.

Services

Economic activities that provide intangible benefits or fulfill the needs of consumers, such as consulting, banking, or repair.