Question 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.

Question 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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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