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Effects on output in the short run and in the medium run

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Reference no: EM131077240

Suppose that money demand is flat, as is the case at very low interest rates.

a. What does this imply for the slope of the LM curve?

b. What does this imply for the slope of the IS curve?

c. What does this imply for the slope of the AD curve?

d. Draw the AD and AS curves, and assume that equilibrium is at a point where output is below the natural level of output. Suppose that the central bank increases the money stock. What will be the effects on output in the short run and in the medium run? Explain in words.

Reference no: EM131077240

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