In a particular economy the real money demand function is M^d /P = 200 + 0.2Y -
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In a particular economy the real money demand function is
M^d /P = 200 + 0.2Y - 2000(r+^e)
Assume that M = 300, P = 2.0 and e = 0.05.
What is the real interest rate r that clears the asset market when Y = 500? When Y = 600? When Y = 700?
Graph the LM curve?
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