Exam 22: The Monetary Policy and Aggregate Demand Curves

If the Bank of Canada conducts open market ________, the money supply ________, shifting the MP curve to the right, everything else held constant.

An increase in government purchases causes the IS curve to shift ________ and the aggregate demand curve to shift ________.

A decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift ________, the equilibrium level of aggregate output to fall, and the IS curve to shift to the ________, everything else held constant.

Everything else held constant, an increase in government spending will cause ________.

If Canadian college students decide that drinking Mexican-brewed beer helps one get noticed, net exports will tend to fall, causing aggregate demand to ________ and the ________ curve to shift to the left, everything else held constant.

When the central bank ________ the money supply, the MP curve shifts to the right, interest rates ________, and equilibrium aggregate output ________, everything else held constant.

In the IS and MP framework, an expansionary monetary policy causes aggregate output to ________ and the interest rate to ________, everything else held constant.

An increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift up, the equilibrium level of aggregate output to ________, and the IS curve to shift to the ________, everything else held constant.

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

An autonomous tightening of monetary policy ________.

Explain the relationship between real and nominal interest rates when inflation is expected to remain unchanged in the short run.

Tightening monetary policy refers to ________.

If the monetary policy rule is given by r = 1.0 + 0.5p, then r represents ________.

A reduction in government spending causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________, everything else held constant.

Everything else held constant, an increase in autonomous consumer spending will cause the IS curve to shift to the ________ and aggregate demand will ________.

If the monetary policy rule is given by r = 1.0 + 0.5p, then 1.0 represents ________.

The reason inflation spiralled in Canada in the 1970s can be attributed to ________.

Everything else held constant, changes in the interest rate affect planned investment spending and hence the equilibrium level of output, but this change in investment spending ________.

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

Central banks aim to ________.