A Falling Investment Function Yields a Falling IS Curve, but a Falling

question 62

Essay

A falling investment function yields a falling IS curve, but a falling demand for real money balance curve yields a rising LM curve. Why?

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Definitions:

Matching Law

A principle in psychology and behavioral economics that states the proportion of responses directed towards an option matches the proportion of reinforcements obtained from that option.

Prefrontal Cortex

The prefrontal cortex is a part of the brain located at the front of the frontal lobes; it is involved in complex behaviors including planning, decision making, and moderating social behavior.

Parietal Lobe

A region of the brain located at the upper back area in the skull, crucial for processing sensory information and spatial navigation.

Thalamus

A major part of the brain located at the center of the brain, functioning as a relay station for sensory and motor signals to the cerebral cortex.