The curve that illustrates the positive relationship between the equilibrium values of aggregate output and the interest rate in the money market is the ?
Correct answer: B. LM curve
- A. money supply curve
- B. LM curve
- C. money demand curve
- D. IS curve
Explanation
The LM curve represents money-market equilibrium and normally slopes upward: higher output increases money demand, requiring a higher interest rate to maintain equilibrium with a fixed money supply.
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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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