DSE 2009 Q31

[The Villain]

http://economicsentrance.weebly.com/uploads/1/1/0/5/1105777/option-a-2009.pdf

Guys please have look at q31..
IS curve is coming out to be downward sloping and Lm too.Bt the answer key says LM is vertical.I differentiated the LM equation wrt r but i'm simply unable to decipher how its vertical.
Please help.Thank You

[Dreyfus]

Ron its mentioned in the ques that if we draw LM and IS in output and exchange rate space......that's y LM is vertical

[The Villain]

Oh f***.Damn!
So we need to diff LM wrt to e right which comes out to be zero.So vertical. Am i Right Vaibhav?

[Dreyfus]

If u use LM relation, and take dY/de it turns out to 0. But here e is on vertical axis and Y on horizontal axis thus de/dY=infinity hence vertical LM

[The Villain]

Ya infinity if we take reciprocal.Thanxx man!!

[Aranya]

same paper part II qsn 15!how to do this?

[The Villain]

P(M intersecxtion E)=P(M).P(E)
6/100=40/100=6+x/100
solve for x...u'll get 9

[kangkan]

wierd as it may seem....my question paper doesnt hae this question!!1

[Aranya]

thanks