Exam 30: The ISLM Model

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

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

In the basic closed-economy ISLM model,as the interest sensitivity of money demand increases,fiscal policy has ________ effect on output and monetary policy has ________ effect on output.

In the basic closed-economy ISLM model,the goods market can be described by the

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

If the economy is on the IS curve,but is to the left of the LM curve,then the ________ market is in equilibrium,but the interest rate is ________ the equilibrium level.

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

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 ________.

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.

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

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 ________.

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

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

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.

The LM curve will be vertical and fiscal policy ineffective when

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

In the long-run ISLM model and with everything else held constant,as long as the level of output ________ the natural rate level,the price level will continue to ________,shifting the LM curve to the ________,until finally output is back at the natural rate level.

An increase in spending that results from expansionary ________ policy causes the interest rate to ________,everything else held constant.

Everything else held constant,a monetary contraction is characterized by ________ output and ________ interest rates.