The Money Multiplier, the Money Market, and the LM Curve
By taking into account the procyclical nature of the money multiplier varies procyclically due to the public's portfolio decisions, this note shows that the slope of the LM curve need not be positive but can be of any sign. From this it follows that a fiscal-policy generated shift in the IS curve will have an ambiguous effect on the interest rate and that fiscal policy multipliers will vary in size with the money multiplier.
Volume (Year): 20 (1994)
Issue (Month): 3 (Summer)
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