Exam 26: The ISLM Model

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

The situation in which expansionary fiscal policy does not lead to a rise in aggregate output is referred to as

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

An increase in the quantity of money supplied shifts the money supply curve to the ________,and the equilibrium interest rate ________,everything else held constant.

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

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

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

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

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

The rate of output at which the price level has no tendency to rise or fall is called the

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.

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

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

The money market is in equilibrium

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

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

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

An autonomous decrease in money demand,other things equal,shifts the ________ curve to the ________.