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

During the expansion phase of the business cycle,households become optimistic about their future earning capacity as do banks.Nominal interest rates rise during expansions.Mortgage lending could be expected to

A change in interest rates ________,while a change in income ________ the real money demand schedule.

Suppose we have normally-sloped IS and LM curves intersecting at point A.Then a monetary policy change shifts the LM curve to the right.Directly below point A we find a point on the new LM curve that shows us

If the proportion of GDP that people choose to hold in the form of money balances is 0.25,then a $100 increase in the money supply will lead to a rightward shift in the LM curve in the amount of

Figure 4-10 -In Figure 4-10 above,preferring the "easy money,tight fiscal" policy mix at a certain income is why we are at

Figure 4-5 -In Figure 4-5 above,suppose that real income is YB and the money market is in equilibrium.The interest rate at this point is ________ to support commodity market equilibrium,so that involuntary inventory changes are ________.

Figure 4-10 -In Figure 4-10 above,expansionary fiscal policy accommodated by the Fed can be pictured as a movement from points

Figure 4-6 -In Figure 4-6 above,with IS₀ shifting to IS₁ against the upward-sloping LM curve,at point 1