Exam 21: Monetary and Fiscal Policy in the ISLM Model

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

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

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

Everything else held constant,a shift in tastes in the U.S.toward Mexican goods will ________ net exports in the U.S.and cause the quantity of aggregate output demanded to ________ in Mexico.

Everything else held constant,expansionary monetary policies will cause ________.

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.

In the long-run ISLM model and with everything else held constant,the long-run effect of an expansionary monetary policy is to ________.

Everything else held constant,a purchase of government securities by the Fed will cause ________.

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

Everything else held constant,an increase in autonomous planned investment spending will cause the IS curve to shift to the ________ and aggregate demand will ________.

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

A decline in taxes ________ consumer expenditure and shifts the ________ curve to the ________,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.

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 ________.

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

A tax increase ________ disposable income,________ consumption expenditure,and shifts the IS curve to the ________,everything else held constant.

In the Keynesian cross diagram,an increase in autonomous consumer expenditure causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________,everything else held constant.

Which of the following does not shift the IS curve?

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

A depreciation of the U.S.dollar makes American goods cheaper relative to foreign goods,resulting in a ________ in net exports in the U.S.and a ________ shift of the IS curve in the U.S.,everything else held constant.