Exam 7: Keynesian System III: Policy Effects in the Is-Lm Model

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Suppose that both government spending and taxes decrease by $1,000.What happens to aggregate income and interest rates? By how much will they change? Explain using an IS-LM graph to illustrate.

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Question 1

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The IS curve will decrease by $1,000 because the government spending multiplier is greater than the tax multiplier by a factor of one.An increase in the IS curve will increase both interest rates and income.

An increase in the money stock has no effect on equilibrium income whenever the

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Question 2

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The simple Keynesian model

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Question 3

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Figure 7-4 -As shown in Figure 7-4,for income to be unchanged when there is an autonomous decline in investment,the interest rate would have to

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Question 4

In the case where money demand is completely interest insensitive (interest elasticity equals zero),an increase in the quantity of money will

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Question 5

In Japan,interest rates are close to zero.As a result,Keynesians would argue that money demand

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Question 6

Assume that there is an increase in perceived bankruptcy risk.As a result of this we would expect to see

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Question 7

An increase in the marginal propensity to hold money

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Question 8

In the IS-LM model,if interest rates fall while output falls the

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Question 9

Between March and November of 2001,the U.S.economy experienced a recession at the same time that nominal interest rates fell significantly.Using the Keynesian model as the base of your analysis,what does this indicate to you about the cause of the cause of the 2001 recession? Be as specific responsible,using graphs to support your answer.

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Question 10

Suppose that the government wants to increase income without changing the interest rate.How can they accomplish this?

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Question 11

If the demand for money is M^d = 100 +.25Y - 100r and then the increase in money demand rises by 100,the LM curve shifts to the

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Question 12

A lower interest elasticity of investment demand leads to a

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Question 13

The higher the interest sensitivity of investment,the

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Question 14

Figure 7-2 -With respect to Figure 7-2,an increase in government spending

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Question 15

If interest rates and output rises,then

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Question 16

During Japan's economic slump in the early 1990s,monetary policy:

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Question 17

Exogenous variables in the IS-LM model variables are

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Question 18

Whenever fiscal policy actions,such as income tax cuts,are utilized to expand the economy,the Keynesians prefer

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Question 19

Traditional Keynesians tend to favor

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Question 20

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Suppose that both government spending and taxes decrease by $1,000.What happens to aggregate income and interest rates? By how much will they change? Explain using an IS-LM graph to illustrate.

An increase in the money stock has no effect on equilibrium income whenever the

The simple Keynesian model

Figure 7-4 -As shown in Figure 7-4,for income to be unchanged when there is an autonomous decline in investment,the interest rate would have to

In the case where money demand is completely interest insensitive (interest elasticity equals zero),an increase in the quantity of money will

In Japan,interest rates are close to zero.As a result,Keynesians would argue that money demand

Assume that there is an increase in perceived bankruptcy risk.As a result of this we would expect to see

An increase in the marginal propensity to hold money

In the IS-LM model,if interest rates fall while output falls the

Suppose that the government wants to increase income without changing the interest rate.How can they accomplish this?

If the demand for money is M^d = 100 +.25Y - 100r and then the increase in money demand rises by 100,the LM curve shifts to the

A lower interest elasticity of investment demand leads to a

The higher the interest sensitivity of investment,the

Figure 7-2 -With respect to Figure 7-2,an increase in government spending

If interest rates and output rises,then

During Japan's economic slump in the early 1990s,monetary policy:

Exogenous variables in the IS-LM model variables are

Whenever fiscal policy actions,such as income tax cuts,are utilized to expand the economy,the Keynesians prefer

Traditional Keynesians tend to favor

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System I: the Role of Aggregate Demand

Keynesian System II: Money,interest,and Income

Keynesian System Iv: Aggregate Supply and Demand

The Monetarist Counterrevolution

Output,inflation,and Unemployment: Alternative Views

New Classical Economics

Real Business Cycles and New Keynesian Economics

Macroeconomic Models:a Summary

Exchange Rates and the International Monetary System

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Optimal Monetary Policy

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters

Exam 7: Keynesian System III: Policy Effects in the Is-Lm Model

Suppose that both government spending and taxes decrease by $1,000.What happens to aggregate income and interest rates? By how much will they change? Explain using an IS-LM graph to illustrate.

An increase in the money stock has no effect on equilibrium income whenever the

The simple Keynesian model

Figure 7-4 -As shown in Figure 7-4,for income to be unchanged when there is an autonomous decline in investment,the interest rate would have to

In the case where money demand is completely interest insensitive (interest elasticity equals zero),an increase in the quantity of money will

In Japan,interest rates are close to zero.As a result,Keynesians would argue that money demand

Assume that there is an increase in perceived bankruptcy risk.As a result of this we would expect to see

An increase in the marginal propensity to hold money

In the IS-LM model,if interest rates fall while output falls the

Suppose that the government wants to increase income without changing the interest rate.How can they accomplish this?

If the demand for money is Md = 100 +.25Y - 100r and then the increase in money demand rises by 100,the LM curve shifts to the

A lower interest elasticity of investment demand leads to a

The higher the interest sensitivity of investment,the

Figure 7-2 -With respect to Figure 7-2,an increase in government spending

If interest rates and output rises,then

During Japan's economic slump in the early 1990s,monetary policy:

Exogenous variables in the IS-LM model variables are

Whenever fiscal policy actions,such as income tax cuts,are utilized to expand the economy,the Keynesians prefer

Traditional Keynesians tend to favor

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System I: the Role of Aggregate Demand

Keynesian System II: Money,interest,and Income

Keynesian System Iv: Aggregate Supply and Demand

The Monetarist Counterrevolution

Output,inflation,and Unemployment: Alternative Views

New Classical Economics

Real Business Cycles and New Keynesian Economics

Macroeconomic Models:a Summary

Exchange Rates and the International Monetary System

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Optimal Monetary Policy

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters

If the demand for money is M^d = 100 +.25Y - 100r and then the increase in money demand rises by 100,the LM curve shifts to the