Evidence that a horizontal LM curve occurred during the middle depression years would require showing that individuals
A)refused to spend excess money.
B)increased the spending of excess money.
C)sold bonds and bought goods.
D)sold assets and bought bonds.

Question

Quizplus · Accepted Answer

A horizontal LM curve would imply that changes in income levels do not affect interest rates. This could occur if individuals were shifting their investments from assets (which may affect interest rates) to bonds, leading to excess supply of money in the market and keeping interest rates low. Selling assets and buying bonds would be one way individuals could achieve this shift in investment.

Evidence That a Horizontal LM Curve Occurred During the Middle