Exam 22: The Monetary Policy and Aggregate Demand Curves

Because prices are slow to move in the short-run, when the Bank of Canada lowers the overnight rate, ________.

Everything else held constant, an appreciation of the domestic currency will cause the IS curve to shift to the ________ and aggregate demand will ________.

Because prices are sticky in the short-run, when the Bank of Canada raises the overnight rate, ________.

An increase in financial frictions causes the IS curve to shift ________ and the aggregate demand curve to shift ________.

Everything else held constant, a depreciation of the domestic currency will cause the IS curve to shift to the ________ and aggregate demand will ________.

Which of the following statements concerning IS - MP analysis is true?

Describe how the Bank of Canada would apply the Taylor principle.

If an economy experiences high interest rates and high unemployment, the ISLM framework predicts that ________ policy has been too ________.

Explain the difference between autonomous changes in monetary policy and the Taylor principle.

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

A decrease in autonomous planned investment spending, other things equal, shifts the ________ curve to the ________.

An increase in the money ________ shifts the MP curve to the ________, causing the interest rate to fall and output to rise, everything else held constant.

The aggregate demand curve is derived from the ________.

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

How does autonomous tightening of monetary policy impact the aggregate demand curve.

A decrease in autonomous consumer expenditure causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________, everything else held constant.

Based on the Taylor Principle, a central bank's endogenous response of raising interest rates when inflation rises ________.

An increase in the money supply, other things equal, shifts the ________ curve to the ________.

Everything else held constant, an autonomous tightening of monetary policy will cause ________.

Everything else held constant, a decrease in net taxes will cause the IS curve to shift to the ________ and aggregate demand will ________.