explain in words how and why the income and interest sensitivity of the demand for real balance affects the slope of the LM curve.
(a):why does a horizontal LM curve implied that fiscal policy has the same effect on the economy as those who driveed in kensiyan model.
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As f gets very large, this slope gets closer and closer to zero. If money demand is very sensitive to the interest rate, then fiscal policy is very effective: with a horizontal LM curve, output increases ...
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