Question

Determine whether each of the following statements are true or false.

a) If investment does not depend on the interest rate, the LM curve is horizontal.

b) If investment does not depend on the interest rate, the IS curve is vertical.

c) If money demand does not depend on the interest rate, the IS curve is horizontal.

d) If money demand does not depend on the interest rate, the LM curve is vertical.

e) If money demand does not depend on income, the LM curve is horizontal.

f) If money demand is extremely sensitive on the interest rate, the LM curve is horizontal

Answer 1

a) True

b) True

c) False

d) False

e) True

f) True