Assume that the money stock is the intermediate target and money demand is totally interest- inelastic.Then,the
A)LM schedule will be horizontal.
B)LM curve schedule would be vertical.
C)IS curve would be horizontal.
D)None of the above

Question

Quizplus · Accepted Answer

When money demand is totally interest inelastic, it means that changes in the interest rate do not affect the quantity of money demanded. In the context of the IS-LM model, this situation would make the LM curve vertical because the money supply is fixed and does not respond to changes in the interest rate.

Assume That the Money Stock Is the Intermediate Target and Money