The LM curve has a
A. positive slope because a higher interest rate leads to a higher incentive to hold money and thus a higher money supply is needed for equilibrium.
B. negative slope because a lower interest rate leads to an increase in the demand for bonds and thus a higher level of domestic production is needed to cause people to continue to hold the same amount of money.
C. positive slope because a higher interest rate leads to a decrease in the demand for money and thus a higher level of domestic production is needed to cause people to continue to hold the same amount of money.
D. negative slope because a lower interest rate leads to a decrease in foreign investments and thus a higher level of domestic production is needed for equilibrium.
Answer: C
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