Exam 26: The ISLM Model

The less interest-sensitive is money demand,the

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

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

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

In the long-run ISLM model and with everything else held constant,the long-run effect of an expansionary monetary policy is to

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.

Using the long-run ISLM model,explain and demonstrate graphically the neutrality of money,for the case of an increase in the money supply.

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

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.

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

If the Fed adopts a policy of pegging the interest rate,a ________ in government spending forces the Fed to increase the money supply to prevent interest rates from ________.

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 increase in the quantity of money supplied shifts the money supply curve to the ________ and the LM curve to the ________,everything else held constant.

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

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

As bonds become a riskier asset,the demand for money ________ and,all else constant,the equilibrium interest rate ________.

Using the ISLM model,explain the effects of a monetary expansion combined with a fiscal contraction.How do the equilibrium level of output and interest rate change?

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

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

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