Question: Problem 5: LM Relation 5a. What does LM mean here? 5b. Which market equilibrium does LM describe? 5c. If the interest rate goes up, how

Problem 5: LM Relation

5a.

What does LM mean here?

5b.

Which market equilibrium does LM describe?

5c.

If the interest rate goes up, how would real money demand change. Explain why.

5d.

If output goes up, how would real money demand change. Explain why.

5e.

Derive the LM curve graphically.

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