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Q. Suppose more ATMs or the Internet reduces money. Use the Liquidity Preference model to show how these events shift the LM curve?
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- What is meant by Liquidity Trap? Which policy is more effective in liquidity trap and why? Discuss its implications. Kindly answer this question as soon asQuestion 2. Suppose Wal-Mart and other major stores will not accept credit cards andconsumers will have to use cash more frequently in transactions. a. Use the liquidity preference diagrams/model to show how the event changes money demand and the LM curve. Explain your answer using both words and diagrams. b. Use the IS-LM diagrams/model to determine the short-run effects on income (Y),interest rate (r), consumption (C), investment (I), and the unemployment rate.What is the theory of liquidity preference? How does it help explain the downward slope of the curve? aggregate-demand
- How does each of the following changes effect on the liquidity preference model equilibrium and IS-LM model equilibrium? Explain and graph each.a) The FED sells Treasury bills on an open market.b) An increase in required reserve ratio.c) An increase in velocity of money.Explain the logic according to liquidity preference theory by which an increase in the money supply changes the aggregate demand curve? Provide an example?What is the Theory of Liquidity Preference? How does it help explain the downward slope of the aggregate-demand curve?
- Define the term Liquidity?Discuss the theory of liquidity preference in relation to aggregate-demand? Draw a graph of the equilibrium in the money market to demonstrate your answerQ2-20 Other things equal, if the demand for money becomes more elastic, then the LM curve will become _______.In other words, a given rise in the interest rate will, in order for money market equilibrium to be preserved, be associated with a ________ rise in income. Select one: a. less elastic / smaller b. less elastic / larger c. more elastic / smaller d. more elastic / larger
- i need in your own words point to point answer Suppose more ATMs or the Internet reduces money. Use the LiquidityPreference model to show how these events shift the LM curveGraphically show and link the long-run equilibrium in goods market and money market, using MD-MS diagram, Investment Expenditure diagram, AE-Y diagram, and AD-AS diagram. a. Clearly explain (using chain reactions) and show the short-run effect of an increase in money supply on the equilibrium of this economy. Make sure you clearly show the impact in all diagrams. b. In the same way, explain and show the long-run effect of the increase in money supply noting that your answer to this question picks up where you finished in part (a) and describes the adjustment process according to the output gap. c. Clearly describe based on your graphs, the long-term neutrality of money. d. Is the composition of Y* any different after the new long-run equilibrium establishes?According to the Theory of Liquidity Preference, a fall in the price level reduces the amount of money that people wish to holdAs a result, falling interest rates stimulates investment spending and aggregate demand. Give an example of this and explain