2. Consider the following simplified real money demand function for the Swiss economy:

Md/P = 700 + 0.1Y - 10,000r.

Assume that M = 1500, P = 3, and pe = 0.01.

a. What is the real interest rate, r, that clears the asset market when Y = 1000? When Y = 1500? Graph the LM curve.

b. Repeat part

(a) for M = 2000. How does the LM curve in this case compare with the LM curve in part (a)?

c. Use M = 1500 again and repeat part

(a) for pe = 0.15. Compare the LM curve in this case with the one in part (a).