Question:
What would be the slope of the LM curve in the interest rate-income plane, if the rate of interest is exogenously determined by the Central bank?
What would be the slope of the LM curve in the interest rate-income plane, if the rate of interest is exogenously determined by the Central bank?
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What does exogenously fixed interest rate mean for LM curve?
Updated On: Dec 21, 2024
- Positively Sloped.
- Negatively Sloped.
- Horizontal.
- Vertical.
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The Correct Option is C
Solution and Explanation
If the interest rate is *exogenously determined* by the central bank, it remains fixed, and the LM curve would be *horizontal* in the interest rate-income plane.
Hence, the correct answer is (c).
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