Exam 27: The ISLM Model

When the central bank ________ the money supply,the LM curve shifts to the right,interest rates ________,and equilibrium aggregate output ________,everything else held constant.

If the economy is on the LM curve,but is to the right of the IS curve,aggregate output will ________ and the interest rate will ________.

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

In the open-economy ISLM model,net export is specified as a function of ________ and exchange rate is specified as a function of ________.

According to the liquidity preference theory,the demand for money is ________ related to aggregate output and ________ related to interest rates.

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

An autonomous rise in ________ shifts the LM curve to the ________,everything else held constant.

The more interest-sensitive is money demand,the

If the Federal Reserve conducts open market sales,the money supply ________,shifting the LM curve to the ________,everything else held constant.

Referring to the Economic Stimulus Act of 2008,the expansionary effect of the government stimulus was overwhelmed by the continuing deterioration in credit market conditions. Everything else held constant and using the ISLM model,the net effect would cause the ________ curve to ________ and output will ________.

An increase in the money supply,other things equal,shifts the ________ curve to the ________.

If the Federal Reserve conducts open market purchases,the money supply ________,shifting the LM curve to the ________,everything else held constant.

As aggregate output rises,the demand for money ________ and the interest rate ________,so that money demanded equals money supplied and the money market is in equilibrium.

Despite an expansionary monetary policy,an economy experiences a recession. Everything else held constant,the recession could occur in spite of the rightward shift of the LM curve if

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 Federal Reserve conducts open market ________,the money supply ________,shifting the LM curve to the right,everything else held constant.

If the economy is characterized by a certain and stable LM curve,then ________ target produces ________ fluctuations in aggregate output.

If the quantity of money demanded is not affected by changes in the interest rate,the LM curve is ________ and fiscal policy will be ________.

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