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Question: islm model consider a closed economy characterized by ...

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IS-LM Model:Β 

Consider a closed economy characterized by:

𝐿𝑇 π‘Œ =0.4Y
𝐿
𝑆 𝑖 =350βˆ’500𝑖
The (nominal) money supply is equal to 1250 and the price level is 1.

i. Draw the LM curve in the (Y,i)-plan.
ii. Find algebraically and compute the slope of the LM curve. Suppose that the Central bank reduces the money stock by 100.
iii. Represent graphically the impact on the LM curve.

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