Exam 27: The ISLM Model

Aggregate output and the interest rate are ________ related to government spending and are ________ related to taxes.

In the Keynesian model the quantity of money demanded is ________ related to income and ________ related to the interest rate.

When the IS and LM curves are combined in the same diagram,the intersection of the two curves determines the equilibrium level of ________ as well as the ________.

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

A decline in the money supply shifts the LM curve to the left,causing the interest rate to ________ and output to ________,everything else held constant.

In the long-run the ISLM model predicts that ________ can change real output.

In the basic closed-economy ISLM model,the goods market equilibrium condition is

Using the ISLM model,explain and show graphically the effect of a fiscal expansion when the demand for money is completely insensitive to changes in the interest rate. What is this effect called?

A contractionary monetary policy shifts the LM curve to the ________,reducing ________,everything else held constant.

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 fall.

The long-run neutrality of money refers to the fact that in the long run,monetary policy

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

Crowding out will be more pronounced the closer to vertical is the

Macroeconomic equilibrium requires

The less interest-sensitive is money demand,the

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

Which of the following statements concerning Keynesian ISLM analysis is TRUE?

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

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

In the money market,a condition of excess supply of money can be eliminated by a ________ in aggregate output or a ________ in the interest rate,everything else held constant.