Exam 30: The ISLM Model

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

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 ISLM model,show graphically and explain the effects of a monetary contraction.What is the effect on the equilibrium interest rate and level of output?

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 ________.

If the price level increases,everything else held constant,the ________ curve shifts to the ________.

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

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

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

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.

The money market is in equilibrium

Which of the following statements concerning Keynesian ISLM analysis is TRUE?

Because inflation was not a serious problem during the Great Depression,Keynes's analysis assumed

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

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

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

If an economy experiences high interest rates and high unemployment,the ISLM framework predicts that ________ policy has been too ________.

Crowding out will be more pronounced the closer to vertical is the

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

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 ________.