It might be useful to explain to students the reason why we draw P1 before drawing the LM curve:
The position of the LM curve depends on the value of M/P. M is an exogenous policy variable. So, if P is low (like P1 in the lower panel of the diagram), then M/P is relatively high, so the LM curve is over toward the right in the upper diagram. If P is high, like P2, then M/P is relatively low, so the LM curve is more toward the left.
Because the value of P affects the position of the LM curve, we label the LM curves in the upper panel as LM(P1) and LM(P2).
It might be useful to explain to students the reason why we draw P1 before drawing the LM curve:The position of the LM curve depends on the value of M/P. M is an exogenous policy variable. So, if P is low (like P1 in the lower panel of the diagram), then M/P is relatively high, so the LM curve is over toward the right in the upper diagram. If P is high, like P2, then M/P is relatively low, so the LM curve is more toward the left. Because the value of P affects the position of the LM curve, we label the LM curves in the upper panel as LM(P1) and LM(P2).
การแปล กรุณารอสักครู่..
