Exam 28: The ISLM Model

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.

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 ________.

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 ________.

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 ________.

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

As interest rates rise,the opportunity cost of holding money ________ and the demand for money ________.

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

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 ________.

As interest rates rise,the opportunity cost of holding money ________ and the demand for money ________.

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

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

If the economy is on the LM curve,but is to the right of the IS curve,then the ________ market is in equilibrium,but aggregate ________ exceeds aggregate ________.

The money market is in equilibrium ________.

If the money demand decreases,everything else held constant,the ________ curve shifts to the ________.

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 ________.

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

Discuss the IS-LM curves and how the equilibrium in the goods and money market is achieved.

An expansionary monetary policy shifts the LM curve to the ________,reducing ________,everything else held constant.

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