Exam 30: The ISLM Model

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

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

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

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 ________.

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

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.

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

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

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

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

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

In the open-economy ISLM model,net export is specified as a function of and exchange arte is specified as a function of .

If the ________ curve is relatively more unstable than the ________ curve,a money supply target is preferred.

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

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

When the central bank ________ the money supply,the LM curve shifts to the right,interest rates ________,and equilibrium aggregate output ________,everything else held constant.

Which of the followings does NOT describe the goods market in the ISLM model?

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

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