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In the context of the LM curve, if the demand for money for transactions motive increases, what happens to the rate of interest?
  • a)
    It remains unchanged.
  • b)
    It decreases.
  • c)
    It increases.
  • d)
    It fluctuates randomly.
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
In the context of the LM curve, if the demand for money for transactio...
An increase in the demand for money for transactions motive, due to higher income levels, would lead to a higher rate of interest in order to restore money market equilibrium.
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In the context of the LM curve, if the demand for money for transactions motive increases, what happens to the rate of interest?a)It remains unchanged.b)It decreases.c)It increases.d)It fluctuates randomly.Correct answer is option 'C'. Can you explain this answer?
Question Description
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