Exam 22: The Monetary Policy and Aggregate Demand Curves

The reason inflation spiralled in Canada in the 1970s can be attributed to ________.

An increase in autonomous consumer expenditure causes the IS curve to shift ________ and the aggregate demand curve to shift ________.

Everything else held constant, a decrease in net taxes will cause the IS curve to shift to the ________ and aggregate demand will ________.

Everything else held constant, a decrease in autonomous consumer spending will cause the IS curve to shift to the ________ and aggregate demand will ________.

Everything else held constant, an increase in net taxes will cause the IS curve to shift to the ________ and aggregate demand will ________.

A decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift down, the equilibrium level of aggregate output to ________, and the IS curve to shift to the ________, everything else held constant.

Central banks aim to ________.

The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to raise ________ interest rates, thereby ________ the level of equilibrium aggregate output., everything else held constant.

An increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift up, the equilibrium level of aggregate output to ________, and the IS curve to shift to the ________, everything else held constant.

In the IS-MP framework a contractionary fiscal policy causes aggregate output to ________ and the interest rate to ________, everything else held constant.

Based on the Taylor Principle, a central bank's endogenous response of raising interest rates when inflation rises ________.

A reduction in government spending causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________, everything else held constant.

In the money market, a condition of excess demand for money can be eliminated by a ________ in aggregate output or a ________ in the interest rate, everything else held constant.

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

The monetary policy (MP)curve indicates the relationship between ________.

Describe the relationship between the IS and MP curves and the aggregate demand curve.

Explain the relationship between Bank of Canada's overnight rate and the real interest rate.

The aggregate demand curve is derived from the ________.

An increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ________, the equilibrium level of aggregate output to rise, and the IS curve to shift to the ________, everything else held constant.

The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to ________ real interest rates, thereby ________ the level of equilibrium aggregate output., everything else held constant.