25Chp20-Econ3310 - Expenditure Multiplier −+ ISLM Model...

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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 P interest rates i (see CH19) d Equilibrium in the Market for Money: The LM Curve Aggregate Output ...
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