书上课后题有解释
The LM curve summarizes the relationship between the level of income and the inter- est rate that arises from equilibrium in the market for real money balances. It tells us the interest rate that equilibrates the money market for any given level of income. The theory of liquidity preference explains why the LM curve slopes upward. This theory assumes that the demand for real money balances L(r, Y) depends negatively on the interest rate (because the interest rate is the opportunity cost of holding money) and positively on the level of income. The price level is fixed in the short run, so the Fed determines the fixed supply of real money balances M/P. As illustrated in Figure 10–5(A), the interest rate equilibrates the supply and demand for real money balances for a given level of income.
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