Exam 22: Is-Lm in Action

If the LM curve shifts to the right, the increase in equilibrium output will be mitigated if the monetary authority is targeting the interest rate.

The Fed responds to a financial panic according to Bagehot's Law. Show the panic and the response on a graph of money supply and demand.

An increase in autonomous investment causes equilibrium output to _____ and the equilibrium interest rate to

Show the effect of an increase on output on a graph of the supply and demand for money. What does this say about the LM curve?

The LM curve shifts because of changes in

A decrease in the real money supply leads to an increase in the equilibrium interest rate and equilibrium level of output in the IS-LM model.

When the Fed increases the money supply, the currency depreciates, nets exports rise and IS shifts to the right.

An increase in taxes causes equilibrium output to _____ and the equilibrium interest rate to

If output is above the natural rate, the price level falls.

If autonomous consumption increases and the money supply increases, it is possible that the equilibrium interest rate will rise.

A decrease in government spending causes the _____ curve to shift to the

If output is below the natural rate then price level will _____, causing the _____ curve to shift right.

An increase in the interest rate causes the currency to appreciate and shifts the IS curve to the left.

Money neutrality implies that a change in the money supply only affects

Which of the following is NOT a change in fiscal policy?

An increase in autonomous consumption has a greater impact on equilibrium output in the Keynesian cross model than the IS-LM model.

If the IS curve is unstable, output will be more stable if the monetary authority targets the money supply.

The IS-LM model implies that output always returns to the natural rate in the long run.

An increase in autonomous consumption shifts the LM curve to the right.

An increase in which of the following would shift IS to the right and AD to the left?