Question: Consider a money demand function Md = PY/i. (a) What is the money market equilibrium condition? Please write down the condition in the form of

Consider a money demand function Md = PY/i.

(a) What is the money market equilibrium condition? Please write down the condition in the form of some relevant equations. Then, write the equation for LM curve with only i on the left side.

(b) From the LM equation derived in (a), draw the LM curve. Indicate the slope of this LM curve in the diagram. In this model, what factor(s) will make the LM curve flatter?

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