2. In a particular economy the real money demand function is M

P Y i 3000 0.1 10,000. d = + −

Assume that M P 6000, 2.0, = = and 0.02. e π =

a. What is the real interest rate, r, that clears the asset market when Y 8000? = When Y 9000? = Graph the LM curve.

b. Repeat part a ( ) for M 6600. = How does the LM curve in this case compare with the LM curve in part a ? ( )

c. Use M 6000 = again and repeat part a ( ) for 0.03. e π = Compare the LM curve in this case with the one in part a . ( )