Keynesians and monetarists differ over how steep the IS and LM curves actually are Monetarists claim that the IS curve must be __________ and the LM curve must be __________?
Correct answer: A. flat; steep
- A. flat; steep
- B. flat; flat
- C. steep; flat
- D. steep; steep
Explanation
Monetarists generally assume investment is quite responsive to interest rates, making the IS curve relatively flat, while money demand is less interest-sensitive, making the LM curve steep. This combination also explains their emphasis on the effectiveness of monetary policy.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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