Exhibit: IS-LM Monetary Policy Based on the graph, starting from equilibrium at interest rate r1 and income Y1, a decrease in the money supply would generate the new equilibrium combination of interest rate and income:

A) r2, Y2 B) r3, Y2 C) r2, Y3 D) r3, Y3 A) r2, Y2 B) r3, Y2 C) r2, Y3 D) r3, Y3

Exhibit: IS-LM Fiscal Policy Based on the graph, starting from equilibrium at interest rate r1 and income Y1, a decrease in government spending would generate the new equilibrium combination of interest rate and income:

A) r2, Y2. B) r3, Y2. C) r2, Y3. D) r1, Y2. A) r2, Y2. B) r3, Y2. C) r2, Y3. D) r1, Y2.

Exam 12: Aggregate Demand Ii: Applying the Islm Model

Suppose that people finally realize that they must save a larger proportion of their income in order to retire and that they simultaneously begin to use new technology that allows them to reduce their holdings of real cash balances as a proportion of their income. Use the IS-LM model to illustrate graphically the impact of these two changes in household behaviour on output and interest rates. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; and v. the terminal equilibrium values.

(Essay)

4.8/5

(37)

Question 21

Exhibit: IS-LM Monetary Policy Based on the graph, starting from equilibrium at interest rate r₁ and income Y₁, a decrease in the money supply would generate the new equilibrium combination of interest rate and income:

(Multiple Choice)

4.9/5

(41)

Question 22

Two identical countries, Alpha and Beta, can be described by the IS-LM model in the short run. The governments of both countries cut taxes by the same amount. The Central Bank of Alpha follows a policy of holding a constant money supply. The Central Bank of Beta follows a policy of holding a constant interest rate. Compare the impact of the tax cut on income and interest rates in the two countries.

(Essay)

4.9/5

(27)

Question 23

If real money balances enter the IS-LM model both through the theory of liquidity preference and the Pigou effect, then a fall in the price level will shift:

(Multiple Choice)

4.9/5

(35)

Question 24

In the IS-LM model, a decrease in output would be the result of a(n):

(Multiple Choice)

4.9/5

(44)

Question 25

Under what condition does a liquidity trap occur?

(Essay)

4.9/5

(36)

Question 26

Use the IS-LM model to illustrate graphically the impact on output and interest rates of a one-time increase in the price level due to a large increase in oil prices. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; and v. the terminal equilibrium values.

(Essay)

4.8/5

(34)

Question 27

An increase in taxes lowers income:

(Multiple Choice)

4.7/5

(38)

Question 28

Assume that the economy is initially in short-run equilibrium at a level of output above the natural rate. Use the IS-LM model to illustrate graphically how the levels of income and interest rates change as the economy returns to the natural rate of output in the long run.

(Essay)

4.9/5

(34)

Question 29

Other things equal, a given change in government spending has a larger effect on demand the:

(Multiple Choice)

4.8/5

(35)

Question 30

If consumption is given by C = 200 + 0.75(Y - T) and investment is given by I = 200 - 25r, then the formula for the IS curve is:

(Multiple Choice)

4.8/5

(29)

Question 31

The debt-deflation theory of the Great Depression suggests that an _ deflation redistributes wealth in such a way as to _ spending on goods and services.

(Multiple Choice)

4.9/5

(29)

Question 32

If the demand function for money is M / P = 0.2Y - 200r, and if M / P increases by 100, then the LM curve for any given interest rate shifts to the:

(Multiple Choice)

4.9/5

(37)

Question 33

Assume that initially everyone expects the price level to stay the same. Now the Bank of Canada announces that it will increase the rate of money growth in one year. People now expect inflation. Use the IS-LM model to illustrate graphically the impact of expected inflation on the level of output and on the real and nominal interest rates.

(Essay)

4.8/5

(37)

Question 34

If inflation is bad, why isn't deflation good? Use the IS-LM model to explain how deflation could result in a contraction in output.

(Essay)

4.8/5

(42)

Question 35

Exhibit: Policy Interaction Based on the graph, starting from equilibrium at interest rate r₃, income Y₂, IS₁, and LM₁, if there is an increase in government spending that shifts the IS curve to IS₂, then in order to keep the interest rate constant, the Bank of Canada should _ the money supply, shifting to _.

(Multiple Choice)

4.9/5

(38)

Question 36

In the IS-LM model when the Bank of Canada decreases the money supply, the public ___ bonds, and the interest rate _, leading to a(n) ___ in investment and income. This is called the monetary transmission mechanism.

(Multiple Choice)

4.7/5

(34)

Question 37

Assume that an economy is described by the IS curve Y = 3,600 + 3G - 2T - 150r and the LM curve Y = 2 M / P + 100r [or r = 0.01Y - 0.02 (M / P)]. The investment function for this economy is 1,000 - 50r. The consumption function is C = 200 + (2 / 3)(Y - T). Long-run equilibrium output for this economy is 4,000. The price level is 1.0. a.Assume that government spending is fixed at 1,200. The government wants to achieve a level of investment equal to 900 and also achieve Y = 4,000. What level of r is needed for I = 900? What levels of T and M must be set to achieve the two goals? What will be the levels of private saving, public saving, and national saving?

(Essay)

4.9/5

(30)

Question 38

In the IS-LM model, a decrease in the interest rate would be the result of a(n):

(Multiple Choice)

4.8/5

(30)

Question 39

Exhibit: IS-LM Fiscal Policy Based on the graph, starting from equilibrium at interest rate r₁ and income Y₁, a decrease in government spending would generate the new equilibrium combination of interest rate and income:

(Multiple Choice)

4.8/5

(28)

Question 40

Showing 21 - 40 of 92

Exhibit: IS-LM Monetary Policy Based on the graph, starting from equilibrium at interest rate r₁ and income Y₁, a decrease in the money supply would generate the new equilibrium combination of interest rate and income:

If real money balances enter the IS-LM model both through the theory of liquidity preference and the Pigou effect, then a fall in the price level will shift:

In the IS-LM model, a decrease in output would be the result of a(n):

Under what condition does a liquidity trap occur?

An increase in taxes lowers income:

Assume that the economy is initially in short-run equilibrium at a level of output above the natural rate. Use the IS-LM model to illustrate graphically how the levels of income and interest rates change as the economy returns to the natural rate of output in the long run.

Other things equal, a given change in government spending has a larger effect on demand the:

If consumption is given by C = 200 + 0.75(Y - T) and investment is given by I = 200 - 25r, then the formula for the IS curve is:

The debt-deflation theory of the Great Depression suggests that an _ deflation redistributes wealth in such a way as to _ spending on goods and services.

If the demand function for money is M / P = 0.2Y - 200r, and if M / P increases by 100, then the LM curve for any given interest rate shifts to the:

If inflation is bad, why isn't deflation good? Use the IS-LM model to explain how deflation could result in a contraction in output.

In the IS-LM model when the Bank of Canada decreases the money supply, the public ___ bonds, and the interest rate _, leading to a(n) ___ in investment and income. This is called the monetary transmission mechanism.

In the IS-LM model, a decrease in the interest rate would be the result of a(n):

Exhibit: IS-LM Fiscal Policy Based on the graph, starting from equilibrium at interest rate r₁ and income Y₁, a decrease in government spending would generate the new equilibrium combination of interest rate and income:

The Science of Macroeconomics

The Data of Microeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labour Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Islm Model

The Open Economy Revisited: the Mundellfleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

A Dynamic Model of Economic Fluctuations

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

The Microfoundations of Consumption and Investment

Filters

Exam 12: Aggregate Demand Ii: Applying the Islm Model

Exhibit: IS-LM Monetary Policy Based on the graph, starting from equilibrium at interest rate r1 and income Y1, a decrease in the money supply would generate the new equilibrium combination of interest rate and income:

If real money balances enter the IS-LM model both through the theory of liquidity preference and the Pigou effect, then a fall in the price level will shift:

In the IS-LM model, a decrease in output would be the result of a(n):

Under what condition does a liquidity trap occur?

An increase in taxes lowers income:

Assume that the economy is initially in short-run equilibrium at a level of output above the natural rate. Use the IS-LM model to illustrate graphically how the levels of income and interest rates change as the economy returns to the natural rate of output in the long run.

Other things equal, a given change in government spending has a larger effect on demand the:

If consumption is given by C = 200 + 0.75(Y - T) and investment is given by I = 200 - 25r, then the formula for the IS curve is:

The debt-deflation theory of the Great Depression suggests that an _____ deflation redistributes wealth in such a way as to _____ spending on goods and services.

If the demand function for money is M / P = 0.2Y - 200r, and if M / P increases by 100, then the LM curve for any given interest rate shifts to the:

If inflation is bad, why isn't deflation good? Use the IS-LM model to explain how deflation could result in a contraction in output.

In the IS-LM model when the Bank of Canada decreases the money supply, the public _____ bonds, and the interest rate _____, leading to a(n) _____ in investment and income. This is called the monetary transmission mechanism.

In the IS-LM model, a decrease in the interest rate would be the result of a(n):

Exhibit: IS-LM Fiscal Policy Based on the graph, starting from equilibrium at interest rate r1 and income Y1, a decrease in government spending would generate the new equilibrium combination of interest rate and income:

The Science of Macroeconomics

The Data of Microeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labour Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Islm Model

The Open Economy Revisited: the Mundellfleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

A Dynamic Model of Economic Fluctuations

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

The Microfoundations of Consumption and Investment

Filters

Exhibit: IS-LM Monetary Policy Based on the graph, starting from equilibrium at interest rate r₁ and income Y₁, a decrease in the money supply would generate the new equilibrium combination of interest rate and income:

The debt-deflation theory of the Great Depression suggests that an _ deflation redistributes wealth in such a way as to _ spending on goods and services.

In the IS-LM model when the Bank of Canada decreases the money supply, the public ___ bonds, and the interest rate _, leading to a(n) ___ in investment and income. This is called the monetary transmission mechanism.

Exhibit: IS-LM Fiscal Policy Based on the graph, starting from equilibrium at interest rate r₁ and income Y₁, a decrease in government spending would generate the new equilibrium combination of interest rate and income: