Exam 28: The ISLM Model

In the long-run ISLM model and with everything else held constant,the long-run effect of an autonomous increase in investment 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 demand of money which will cause the interest rate to ________.

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

Show graphically and explain why targeting an interest rate is preferable when money demand is unstable and the IS curve is stable.

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

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 ________.

Describe the key assumption that drives Keynes's ISLM model.

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.

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

The ________ describes the combinations of interest rates and aggregate output for which the quantity of money demanded equals the quantity of money supplied.

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 rise.

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 rise.

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?

Show graphically and explain why targeting an interest rate is preferable when money demand is unstable and the IS curve is stable.

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 rise.

Everything else held constant,an expansionary ________ policy will cause the interest rate to rise,while an expansionary ________ policy will cause the interest rate to fall.

Macroeconomic equilibrium requires ________.

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

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.

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