Exam 26: The ISLM Model

Macroeconomic equilibrium requires

If the economy is on the LM curve,but is to the left of the IS curve,aggregate output will ________ and the interest rate will ________.

An increase in spending that results from expansionary ________ policy causes the interest rate to ________,everything else held constant.

The more interest-sensitive is money demand,the

If the economy is on the LM curve,but is to the right of the IS curve,aggregate output will ________ and the interest rate will ________.

An expansionary monetary policy shifts the LM curve to the ________,reducing ________,everything else held constant.

Referring to the Economic Stimulus Act of 2008,the expansionary effect of the government stimulus was overwhelmed by the continuing deterioration in credit market conditions.Everything else held constant and using the ISLM model,the net effect would cause the ________ curve to ________ and output will ________.

If the economy is on the IS curve,but is to the right of the LM curve,aggregate output will ________ and the interest rate will ________.

If the economy is on the LM curve,but is to the right of the IS curve,then the ________ market is in equilibrium,but aggregate ________ exceeds aggregate ________.

An autonomous decrease in money demand,other things equal,shifts the ________ curve to the ________.

The long-run neutrality of money refers to the fact that in the long run,monetary policy

Everything else held constant,if aggregate output is to the ________ of the LM curve,then there is an excess demand of money which will cause the interest rate to ________.

In the long-run ISLM model and with everything else held constant,an increase in the money supply leaves the level of output and interest rates unchanged,an outcome called

Everything else held constant,a monetary contraction is characterized by ________ output and ________ interest rates.

In the long-run ISLM model and with everything else held constant,the long-run effect of an autonomous fall in consumption expenditure is to ________ real output and ________ the interest rate.

If the economy is on the IS curve,but is to the left of the LM curve,then the ________ market is in equilibrium,but the interest rate is ________ the equilibrium level.

Using the ISLM model,explain the effects of a monetary expansion combined with a fiscal contraction.How do the equilibrium level of output and interest rate change?

Aggregate output and the interest rate are ________ related to government spending and are ________ related to taxes.

Using the ISLM model,show graphically and explain the effects of a monetary contraction.What is the effect on the equilibrium interest rate and level of output?

If the Federal Reserve conducts open market purchases,the money supply ________,shifting the LM curve to the ________,everything else held constant.