(Answered) Consider the following description of the financial sector

Economics

Consider the following description of the financial sector of the economy:

(M/P)^d = f + g(Y) - h(i),

π^e = 0 => i = r

M^S = M⁰

P = P⁰

a. Draw the LM-curve. Solve for the LM-curve expressing r in terms of Y

b. What is the slope (Δr/ΔY) of the LM-curve.

c. Draw the LM-curve if h = 0. What does this mean?

d. What happens to the slope of the LM-curve as h increases?

e. What does the LM-curve look like if g = 0, that is Y does not affect the demand for money?

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Macroeconomics, Economics

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