igidr qn

[phelps.phan]

I remembered a qn but I'm not sure if my answer is right.
a)Investment is very sensitive to interest rate. This implies IS curve is flat
True. Since I-r schedule is flat. IS is also flat.

b)Money demand is very sensitive to interest rate. This implies LM curve is flat.
I think this one is False. Since interest rate does not affect money demand, Y is unaffected by r; Y in money market is fixed based on money supply. So LM is vertical.

Please provide ur inputs.

[saurabh5289]

if money demand is sensitive to interest rate lm curve will be flat. it is true because increase in denand for money leads to increase in interest rate.