ECON 1110 Problem Set 05 - ECON 1110 Intermediate Macroeconomics Problem Set 5 Autumn 2010 1 Explain the Keynesian theory of interest rate determination

ECON 1110 Problem Set 05 - ECON 1110 Intermediate...

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ECON 1110 Intermediate Macroeconomics Problem Set 5 Autumn 2010 1.Explain the Keynesian theory of interest rate determination. What differences do you see between this theory and the classical theory of the interest rate?2.What are Keynes’ three motives for holding money demand? Explain each motive briefly.3.What variables will shift the LM curve? Explain (graphically and verbally) the way in which a change in each variable shifts the LM curve.4.Why is the slope of the LM curve positive?5.Suppose money supply is fixed at 100 and money demand is given by:M

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