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How the LM curve is derived & how IS-IM affects the economy

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How is the liquidity-money (LM) curve derived? What impacts it and how does it impact the global economy? Use examples and support your claims.

What is fiscal and monetary policy and how changes in equilibrium using the IS-LM Model occur as a result of changes in fiscal and monetary policy?

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Solution Summary

How the Liquidity-Money (LM) curve is derived and examples of how changes in the IS-LM equilibrium impact the economy are provided.

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The LM curve stands for "Liquidity preference and Money supply equilibrium". It shows the set of equilibrium points between the Demand for Money (liquidity preference) and the Supply of Money in an economy. The LM curve is affected by factors that shift the Money Demand and Money Supply curves, such as:
1. Transactions demand for money. As GDP ...

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