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1.Explain the relationship between the rate of interest and the demand for money within the Keynesian theory of money demand. 2.Explain how the LM slope

1.Explain the relationship between the rate of interest and the demand for money within the Keynesian theory of money demand.

2.Explain how the LM slope could be different.

3. Suppose that

Ms = 100

Md = 40 + 0.1Y - 10r

(a)Write the equation for LM schedule.

Find the equilibrium values for income and interest rate. Find the new equilibrium when money supply increases to 130. Show the change graphically

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