2. (a) Given the following data about the monetary sector of the economy: Md = 0.4Y - 80r Ms = 1200 million Where, Ma is demand for money, Y is the level of income, r is the rate of interest and Ms is the supply of money. Derive the equation for LM curve and give the economic interpretation of this curve. Show the excess demand and excess supply in the money market. (b) Draw the graph and explain the derivation of LM curve.

2. (a) Given the following data about the monetary sector of the economy: Md = 0.4Y - 80r Ms = 1200 million Where, Ma is demand for money, Y is the level of income, r is the rate of interest and Ms is the supply of money. Derive the equation for LM curve and give the economic interpretation of this curve. Show the excess demand and excess supply in the money market. (b) Draw the graph and explain the derivation of LM curve.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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