This preview shows page 1. Sign up to view the full content.
Unformatted text preview: Expenditure Multiplier −+ ISLM Model LM curve plots i as a function of Y and is upward sloping
because for higher Y , money demand is higher. For each level of aggregate output, the LM curve tells us what
the interest rate must be for equilibrium to occur The LM curve connects points that satisfy the equilibrium
condition that M d = M s Money demand M = f ( i , Y ) depends on income Y and
interest rates i (see CH19) d Equilibrium in the Market for Money: The LM Curve Aggregate Output ...
View Full Document
- Fall '08