Question 1

Which of the following would cause a shift in the LM curve?

Accepted Answer

A)  The government decreases Medicare benefits. 
B)  The government buys commercial paper. 
C)  The city government increases the sales tax. 
D)  All of the above. 
A)  The government decreases Medicare benefits. 
B)  The government buys commercial paper. 
C)  The city government increases the sales tax. 
D)  All of the above.

Question 2

During a financial panic, the monetary authority should target the _____ and _____ it.

Accepted Answer

A)  interest rate, raise 
B)  interest rate, lower 
C)  money supply, raise 
D)  money supply, lower 
A)  interest rate, raise 
B)  interest rate, lower 
C)  money supply, raise 
D)  money supply, lower

Question 3

During a financial panic, the LM curve shifts to the left.

Accepted Answer

A) True 
 B)False

Question 4

If output is below the natural rate, output eventually rises due to a fall in the price level and shift of LM to the right.

Accepted Answer

A) True 
 B)False

Question 5

The natural rate level of output is associated with

Accepted Answer

A)  the Aggregate Demand and Supply model. 
B)  Hamilton's Law 
C)  IS-LM model. 
D)  none of the above. 
A)  the Aggregate Demand and Supply model. 
B)  Hamilton's Law 
C)  IS-LM model. 
D)  none of the above.

Question 6

A monetary policymaker is better off targeting the money supply when the _____ curve is unstable.

Accepted Answer

A)  money demand 
B)  IS 
C)  LM 
D)  none of the above 
A)  money demand 
B)  IS 
C)  LM 
D)  none of the above

Question 7

Crowding out requires a shift in the LM curve.

Accepted Answer

A) True 
 B)False

Question 8

Changes in monetary policy shift the LM curve, while changes in fiscal policy shift the IS curve.

Accepted Answer

A) True 
 B)False

Question 9

An increase in autonomous consumption leads to an increase in the equilibrium interest rate and equilibrium level of output in the IS-LM model.

Accepted Answer

A) True 
 B)False

Question 10

If the price level falls, equilibrium output rises and the equilibrium interest rate falls.

Accepted Answer

A) True 
 B)False

Question 11

Any shift in IS or LM has an equivalent shift in AD.

Accepted Answer

A) True 
 B)False

Question 12

The IS-LM model predicts that policy makers are greatly influential.

Accepted Answer

A) True 
 B)False

Question 13

Movement up along the AD curve is associated with an increase in the interest rate.

Accepted Answer

A) True 
 B)False

Question 14

Fiscal and monetary stimulus differ qualitatively in the effect on

Accepted Answer

A)  output. 
B)  interest rates. 
C)  the price level. 
D)  unemployment. 
A)  output. 
B)  interest rates. 
C)  the price level. 
D)  unemployment.

Question 15

Explain what happens on an IS-LM graph when the Fed decreases the money supply that would show money neutrality.

Accepted Answer

Starting from the natural rate of output

Which of the following would cause a shift in the LM curve?

During a financial panic, the monetary authority should target the _ and _ it.

During a financial panic, the LM curve shifts to the left.

If output is below the natural rate, output eventually rises due to a fall in the price level and shift of LM to the right.

The natural rate level of output is associated with

A monetary policymaker is better off targeting the money supply when the _____ curve is unstable.

Crowding out requires a shift in the LM curve.

Changes in monetary policy shift the LM curve, while changes in fiscal policy shift the IS curve.

An increase in autonomous consumption leads to an increase in the equilibrium interest rate and equilibrium level of output in the IS-LM model.

If the price level falls, equilibrium output rises and the equilibrium interest rate falls.

Any shift in IS or LM has an equivalent shift in AD.

The IS-LM model predicts that policy makers are greatly influential.

Movement up along the AD curve is associated with an increase in the interest rate.

Fiscal and monetary stimulus differ qualitatively in the effect on

Explain what happens on an IS-LM graph when the Fed decreases the money supply that would show money neutrality.

The Financial System

Money

Interest Rates

The Economics of Interest-Rate Fluctuations

The Economics of Interest-Rate Spreads and Yield Curves

Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities

Financial Structure, Transaction Costs, and Asymmetric Information

Bank Management

Innovation and Structure in Banking and Finance

The Economics of Financial Regulation

Financial Derivatives

Financial Crises: Causes and Consequences

Central Bank Form and Function

The Money Supply Process and the Money Multipliers

Monetary Policy Tools

Monetary Policy Targets and Goals

Foreign Exchange

International Monetary Regimes

Money Demand

Is-Lm

Aggregate Supply and Demand and the Growth Diamond

Monetary Policy Transmission Mechanisms

Inflation and Money

Rational Expectations Redux: Monetary Policy Implications

Filters

Exam 22: Is-Lm in Action

Which of the following would cause a shift in the LM curve?

During a financial panic, the monetary authority should target the _____ and _____ it.

During a financial panic, the LM curve shifts to the left.

If output is below the natural rate, output eventually rises due to a fall in the price level and shift of LM to the right.

The natural rate level of output is associated with

A monetary policymaker is better off targeting the money supply when the _____ curve is unstable.

Crowding out requires a shift in the LM curve.

Changes in monetary policy shift the LM curve, while changes in fiscal policy shift the IS curve.

An increase in autonomous consumption leads to an increase in the equilibrium interest rate and equilibrium level of output in the IS-LM model.

If the price level falls, equilibrium output rises and the equilibrium interest rate falls.

Any shift in IS or LM has an equivalent shift in AD.

The IS-LM model predicts that policy makers are greatly influential.

Movement up along the AD curve is associated with an increase in the interest rate.

Fiscal and monetary stimulus differ qualitatively in the effect on

Explain what happens on an IS-LM graph when the Fed decreases the money supply that would show money neutrality.

The Financial System

Money

Interest Rates

The Economics of Interest-Rate Fluctuations

The Economics of Interest-Rate Spreads and Yield Curves

Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities

Financial Structure, Transaction Costs, and Asymmetric Information

Bank Management

Innovation and Structure in Banking and Finance

The Economics of Financial Regulation

Financial Derivatives

Financial Crises: Causes and Consequences

Central Bank Form and Function

The Money Supply Process and the Money Multipliers

Monetary Policy Tools

Monetary Policy Targets and Goals

Foreign Exchange

International Monetary Regimes

Money Demand

Is-Lm

Aggregate Supply and Demand and the Growth Diamond

Monetary Policy Transmission Mechanisms

Inflation and Money

Rational Expectations Redux: Monetary Policy Implications

Filters

During a financial panic, the monetary authority should target the _ and _ it.