Question: Assume that money demand is given by ( M / P ) d = 0 . 5 Y 1 0 0 r , and (

Assume that money demand is given by (M / P)d =0.5Y 100r, and (M / P)s equals 800.
Write the LM curve two ways, expressing Y as a function of r and r as a function of Y.(Hint: Write the LM curve only relating Y and r using the equilibrium condition for the market for real money balances.)
Express the equation two ways: (1) Y as a function of r; (2) r as a function of Y.
What is the slope of the LM curve (where r is on the y-axis and Y on the x-axis)?
If r is 1 percent, what is Y along the LM curve?
If r is 3 percent, what is Y along the LM curve?
If r is 5 percent, what is Y along the LM curve?
If M/P increases, does the LM curve shift upward and to the left or downward and to the right?
If M increases and P is constant, does the LM curve shift upward and to the left or downward and to the right?
If P increases and M is constant, does the LM curve shift upward and to the left or downward and to the right?

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