Question: islm model consider a closed economy characterized by ...
Consider a closed economy characterized by:
𝐿𝑇 𝑌 =0.4Y
𝐿𝑆 𝑖 =350−500𝑖
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.