An Explanation for the Slope of the LM Curve Is

question 58

Multiple Choice

An explanation for the slope of the LM curve is that as:

• A) the interest rate increases, income becomes higher.
• B) the interest rate increases, income becomes lower.
• C) income rises, money demand rises, and a higher interest rate is required.
• D) income rises, money demand rises, and a lower interest rate is required.

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Definitions:

Long-Run Aggregate Supply Curve

A graphical representation that shows the relationship between the overall price level and the quantity of goods and services produced by an economy when all resources are fully employed.

Cyclical Unemployment

The variation in unemployment caused by the ups and downs of economic cycles, including recessions and expansions.

Recessionary Gap

A situation where an economy's actual production is less than its potential output, often leading to unemployment and underused resources.

Potential Output

The level of productivity an economy can achieve with full employment and resources utilization, without causing inflation.