Exam 4: Strong and Weak Policy Effects in the Is-Lm Model

Which of the following statements would be true for an economy that can be characterized as being to the right of its LM curve?

Suppose the government increases its expenditures by $100 million and finances the resulting deficit by selling bonds.Then the LM curve will

The use of money ________ barter,and ________ economic specialization.

Suppose the demand for money becomes less sensitive to changes in the interest rate.In moving along an LM curve,an increase in income must be accompanied by a ________ change in the interest rate than before,meaning that the LM curve has become ________.

Moving upward along an LM curve,velocity ________ because ________ remains constant while ________ rises.

Figure 4-10 -In Figure 4-10 above,if the Fed's goal is to hold income constant,contractionary fiscal policy combined with the Fed's response takes us from points

A decrease in real GDP causes

The effect on the IS curve of a reduction in taxes will be less the

A change in the public's desire to hold money will

According to Paul Krugman,during the past decade Japan's macroeconomic policy should have incorporated which of the following?

To "accommodate" an expansionary fiscal policy,the Fed ________ the money supply in order to hold ________ constant.

A "tight" money,easy "fiscal" policy combination will be preferred by society which values

In the early stages of macroeconomic model building,the money supply is regarded as a policy ________ that is under ________ control by the Federal Reserve.

An increase in real GDP causes the demand for real money balances to

Consider an initial IS-LM equilibrium with normally-sloped curves.An increase in government spending shifts the ________ by a horizontal distance equal to the change in government spending ________.

Fully accommodating monetary policy results in

Figure 4-5 -In Figure 4-5,the commodity market is in equilibrium

From any point below the current LM curve,money market equilibrium can be restored by some combination of a ________ income and a ________ interest rate that ________ the demand for money.

From an initial IS-LM equilibrium with normally-sloped IS and LM curves,the money supply falls.At the new IS-LM equilibrium we have some combination of a ________ income and a ________ interest rate.

Figure 4-5 -In Figure 4-5 above,at what income would the interest rate that brings about money market equilibrium cause unwanted inventories of commodities to accumulate?