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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F486a4365-5d3f-4949-8096-1408aaad2c65%2F550365ec-ba31-4e0b-89c0-cfa052d40837%2Fgnmjtmt_processed.png&w=3840&q=75)
Transcribed Image Text: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.
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