Exam 21: Monetary and Fiscal Policy in the ISLM Model

A rise in autonomous planned investment spending causes the equilibrium level of aggregate output to ________ and shifts the ________ curve to the ________,everything else held constant.

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

The rate of output at which the price level has no tendency to rise or fall is called the ________.

Everything else held constant,a depreciation of the domestic currency will cause the IS curve to shift to the ________ and aggregate demand will ________.

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

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 Keynesian cross diagram,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.

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

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

Other things equal,a decrease in autonomous consumption shifts the ________ curve to the ________.

In deriving the aggregate demand curve a ________ price level ________ the money supply in real terms,raises interest rates,and ________ the equilibrium level of aggregate output.

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

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

An increase 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 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.

Using the ISLM model,explain the effects of a monetary expansion combined with a fiscal contraction.How do the equilibrium level of output and interest rate change?

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.

If the economy is characterized by a stable IS curve and an unstable LM curve,then ________ target produces ________ fluctuations in aggregate output.

In the Keynesian cross diagram,a decline in autonomous consumer expenditure causes the aggregate demand function to shift ________,the equilibrium level of aggregate output to fall,and the IS curve to shift to the ________,everything else held constant.

A decline in the money supply shifts the LM curve to the left,causing the interest rate to ________ and output to ________,everything else held constant.