Assume That the Equilibrium in the Money Market May Be $L M$

Essay

Assume that the equilibrium in the money market may be described as M/P = 0.5Y - 100r, and M/P equals 800. a. Write the $L M$ curve two ways, expressing $Y$ as a function of $r$ and $r$ as a function of $Y$ . (Hint: $W$ rite the $L M$ curve only relating $Y$ and $r$ , substitute out $M P$ .)
b. What is the slope of the $L M$ curve?
c. If $r$ is 1 percent, what is $Y$ al ong the $L M$ curve? If $r$ is 3 percent, what is $Y$ al ong the $L M$ curve? If $r$ is 5 percent, what is $Y$ al ong the $L M$ curve?
d. If $M / P$ increases, does the $L M$ curve shift upward and to the left or downward and to the right?
e. If $M$ increases and $P$ is constant, does the $L M$ curve shift upward and to the left or downward and to the right?
f. If $P$ increases and $M$ is constant, does the $L M$ curve shift upward and to the left or downward and to the right?