Question: Hi, good step by step explanations please! Q5. Getting to equilibrium in LS-LM. (a) Consider point A in the gure below. Is this an equilibrium

Hi, good step by step explanations please!

Q5. Getting to equilibrium in LS-LM. (a) Consider point A in the gure below. Is this an equilibrium point? Why/why not? What would you expect to happen if the economy was Initially at point A? Point A is not on the [5 curve. At this low interest rate aggregate demand exceeds production so production will increase. (b) Do the same analysis for point 3. Point B is not on the LM curve. At this high interest rate, money holdings are higher than people desire so people will lend money and the interest rate will fall. 1'2

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