LM MODEL
We have seen that the demand of money depends
on the level of income (or demand of goods):
Variations in the level of income
determine movements in the demand of money curve, which implies
a new point of equilibrium and therefore, a new interest rate
(we are considering that the monetary offer is fixed in the
short term).
Therefore, every income level has a corresponding
balanced interest rate.
If we represent the different points (level
of income, corresponding interest rates) in a graph, we will obtain
a curve with a positive slope which we can call the "LM Curve".
Well guys, this time it
has been easy, so get to work and prepare for the examp...Why
are you looking at me like that? Listen, yes you, where are you
going with that umbrella? Hey, where are you going? ........
