Answer to Question #224887 in Macroeconomics for Anum naz

Question

What would the LM curve look like in a classical world? If this really were the LM curve that
we thought best characterized the economy, would we lean toward the use of fiscal policy or
monetary policy? (You may assume your goal is to affect output.)

Answer 1

ANSWER

Everything in the economy is thought to be ideal. The total inventory bend is upward, which mirrors financial experts' conviction that adjustments of genuine interest just briefly change the economy's absolute yield. Over the long haul, an expansion in cash will fail to help the product, yet it will build costs.