Other things equal, a given change in money supply has a larger effect on demand the:
A) larger the income sensitivity of money demand.
B) smaller the income sensitivity of money demand.
C) flatter the LM curve.
D) steeper the IS curve.

Question

Quizplus · Accepted Answer

A smaller income sensitivity of money demand means that changes in income have a smaller effect on the demand for money, resulting in a larger effect of a given change in money supply on demand.

Other Things Equal, a Given Change in Money Supply Has