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In a particular economy the real money demand function is
Md/P=3000+0.1Y-10000i

Assume that M=6000, P=2.0, πe = 0.02

(a) What real interest rate r is consistent with equilibrium in the asset market when Y = 8000?
(b) What real interest rate r is consistent with equilibrium in the asset market when Y = 9000?
(c) Graph the LM curve.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M942492

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