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please help me with this question!! 10. The demand for money is Md/P = L(Y, i), where L(Y,i) is an increasing function of real income

please help me with this question!!

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10. The demand for money is Md/P = L(Y, i), where L(Y,i) is an increasing function of real income Y. Fori > 0, money demand is decreasing in the nominal interest rate i. Money demand becomes perfectly interest elastic ati = 0. The price level is P. (a) [2 marks] Give a brief justification of each of the properties of the money demand function assumed above. The LM curve represents money market equilibrium (Md = M3). Assume the cen tral bank targets a constant money supply M5 and that the price level P is fixed. (b) [3 marks] Show how the LM curve is derived from money-market equilibrium. Illustrate the LM curve, taking account of its shape where i = 0. Suppose that owing to tighter lending criteria, rms' investment demand is lower (treat this as affecting the autonomous component of investment demand). (c) [3 marks] Using the IS-LM model, show how this can result in the interest rate ifalling to zero. If that happens, explain why the model predicts the economy enters a liquidity trap where conventional monetary policy is ineffective. Now consider the AD-AS model where nominal wages are xed in the short run at a level where labour demand is less than desired labour supply. (d) [3 marks] Explain how the shape of the AD curve is affected by the liquidity trap. Following the negative shock to investment demand, can lower prices P mitigate the fall in real GDP found in part (c)

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