Exam 9: The IS-LMAD-AS Model: A General Framework for Macroeconomic Analysis

A rise in expected future output that doesn't affect labour supply would shift the IS curve ________ and the FE line ________.

When all markets in the economy are simultaneously in equilibrium, we say

The FE line shows the level of output at which the ________ market is in equilibrium.

A tax cut on capital will

A financial innovation, such as money market mutual funds, which increases the liquidity of alternatives to money, would

A temporary decrease in government purchases causes the real interest rate to ________ and output to ________ in the short run, before prices adjust to restore equilibrium.

A temporary decline in government purchases would shift the IS curve ________ and the LM curve ________.

A temporary increase in government purchases causes the real interest rate to ________ and output to ________.

A temporary supply shock, such as a bumper crop, would

Under an assumption of monetary neutrality, a change in the nominal money supply has

The IS curve would unambiguously shift up if there were

Which of the following would shift the FE line to the left?

An increase in money supply causes the real interest rate to ________ and output to ________ in the short run, before prices adjust to restore equilibrium.

Which of the following best describes the classical and the Keynesian views on the monetary neutrality?

A change that increases the real money supply relative to real money demand causes

A temporary adverse supply shock directly causes

Desired consumption is C^d = 2000 + 0.9Y - 100,000 r - G, and desired investment is I^d = 1000 - 45,000r. Real money demand is M^d/P = Y - 6000i. Other variables are π^e = 0.03, G = 500, Y = 1000, and M = 2100. a. Find the equilibrium values of the real interest rate, consumption, investment, and the price level. b. Suppose government purchases decline to 400. What happens to the variables listed in part (a)? c. Suppose government purchases rise to 600. What happens to the variables listed in part (a)? d. What feature in this example leads to the result that you don't need to know the amount of taxes collected by the government to find the equilibrium?

Which of the following would shift the FE line to the right?

A decrease in taxes (when Ricardian equivalence doesn't hold) causes the real interest rate to ________ and output to ________ in the short run, before prices adjust to restore equilibrium.

A temporary supply shock, such as an increase in oil prices, would