ECN 302 Fall 2021 Professor J. Ondrich Problem Set 11 Page 2 of 2 The equation of the LM curve is given by the following formula: r =(h/ f )Y - (1/ f )(M 5 /P), where M s /P is the real money supply, h is the response of the money to a $1 change in income at a fixed interest rate, and f is the response of money demand to a one percentage point change in the interest rate. Assume the following values for the exogenous variable M 5 / P and parameters h and fin the LM curve: MS /P =300,h =0.4, andf =50. (a) What is the horizontal intercept of the LM curve? (b) What is the slope (Ar / AY)? of the LM curve? (c) What is the equation of the LM curve? (d) If the Fed increased the money supply by 100, at what value on the horizontal axis would the LM curve intersect it? What happens to the slope of the LM curve