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Explain why each of the following statements is true. Discuss the impact of monetary and fiscal policy in each of these special cases.

05 / 03 / 2018 Assignment

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Explain why each of the following statements is true. Discuss the impact of monetary and fiscal policy in each of these special cases.

a. If investment does not depend on the interest rate, the IS curve is vertical.
b. If money demand does not depend on the interest rate, the LM curve is vertical.
c. If money demand does not depend on income, the LM curve is horizontal.
d. If money demand is extremely sensitive to the interest rate, the LM curve is horizontal.


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