Exam 28: The ISLM Model

If the quantity of money demanded is not affected by changes in the interest rate, the LM curve is ________ and fiscal policy will be ________.

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 Keynesian model the quantity of money demanded is ________ related to income and ________ related to the interest rate.

In the long-run ISLM model and with everything else held constant, the long-run effect of a fall in net exports is to ________ real output and ________ the interest rate.

In the long-run ISLM model and with everything else held constant, an increase in the money supply leaves the level of output and interest rates unchanged, an outcome called ________.

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 ________.

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

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.

The less interest-sensitive is money demand, the ________.

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

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 right of the LM curve, then there is an excess ________ of money which will cause the interest rate to ________.

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 rise.

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.

Everything else held constant, if aggregate output is to the left of the LM curve, then there is an excess ________ of money which will cause the interest rate to ________.

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

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

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 ________.

In the Keynesian model the quantity of money demanded is ________ related to income and ________ related to the interest rate.

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 ________.