1. Suppose the LM curve is given by (M/P)- d,Y-d,i. The slope of the LM curve is If d, is small, i.e. if money demand is _(sensitive /not very sensitive) to the level of income, then an increase in income will cause a (small /large) _(small /large) increase in money demand and only a increase in the interest rate is necessary to restore equilibrium in the money market: the LM curve is relatively _(flat /steep). Similarly, if d, is small, i.c. if the quantity of money demanded is (sensitive /not very sensitive) to the interest rate, then an increase in income will increase money demand and it requires a (small large) increase in the interest rate to restore equilibrium in the money market: the LM curve is relatively _(flat /steep). 2. For this question, assume that Y-N. Based on our understanding of the labor market model presented in Chapter 6, we know that a reduction in the markup will cause an/a (increase, reduction) in the natural level of output. 3. If u ? -? )

1. Suppose the LM curve is given by (M/P)- d,Y-d,i. The slope of the LM curve is If d, is small, i.e. if money demand is _(sensitive /not very sensitive) to the level of income, then an increase in income will cause a (small /large) _(small /large) increase in money demand and only a increase in the interest rate is necessary to restore equilibrium in the money market: the LM curve is relatively _(flat /steep). Similarly, if d, is small, i.c. if the quantity of money demanded is (sensitive /not very sensitive) to the interest rate, then an increase in income will increase money demand and it requires a (small large) increase in the interest rate to restore equilibrium in the money market: the LM curve is relatively _(flat /steep). 2. For this question, assume that Y-N. Based on our understanding of the labor market model presented in Chapter 6, we know that a reduction in the markup will cause an/a (increase, reduction) in the natural level of output. 3. If u ? -? )

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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ANSWER BOTH C & D
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