Exam 27: The ISLM Model

Which of the followings does NOT describe the goods market in the ISLM model?

In the long-run ISLM model and with everything else held constant,the long-run effect of a tax cut is to ________ real output and ________ the interest rate.

If the Fed adopts a policy of pegging the interest rate,a ________ in government spending forces the Fed to increase the money supply to prevent interest rates from ________.

In the long-run ISLM model and with everything else held constant,the long-run effect of an autonomous fall in consumption expenditure is to ________ real output and ________ the interest rate.

If an economy experiences high interest rates and high unemployment,the ISLM framework predicts that ________ policy has been too ________.

The LM curve will be vertical and fiscal policy ineffective when

In the long-run ISLM model and with everything else held constant,an increase in the money supply leaves the level of output and interest rates unchanged,an outcome called

In the long-run ISLM model and with everything else held constant,as long as the level of output ________ the natural rate level,the price level will continue to ________,shifting the LM curve to the ________,until finally output is back at the natural rate level.

If the economy is on the LM curve,but is to the right of the IS curve,then the ________ market is in equilibrium,but aggregate ________ exceeds aggregate ________.

Everything else held constant,if aggregate output is to the ________ of the LM curve,then there is an excess ________ of money which will cause the interest rate to rise.

In the ISLM framework a contractionary fiscal policy causes aggregate output to ________ and the interest rate to ________,everything else held constant.

An increase in spending that results from expansionary ________ policy causes the interest rate to ________,everything else held constant.

As bonds become a riskier asset,the demand for money ________ and,all else constant,the equilibrium interest rate ________.

In the basic closed-economy ISLM model,the goods market can be described by the

Using the long-run ISLM model,explain and demonstrate graphically the neutrality of money,for the case of an increase in the money supply.

If the price level increases,everything else held constant,the ________ curve shifts to the ________.

If the ________ curve is relatively more unstable than the ________ curve,an interest rate target is preferred.

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

An increase in the money supply shifts the LM curve to the right,causing the interest rate to ________ and output to ________,everything else held constant.

In the basic closed-economy ISLM model,the IS curve can be described by an equation where