Exam 4: Monetary and Fiscal Policy in the Is-Lm Model

The money supply is controlled by the

In a liquidity trap, the

Figure 4-10 -In the figure above, expansionary fiscal policy accommodated by the Fed can be pictured as a movement from points

Suppose that Y = 4,000 and we are at a point on the money demand schedule where (M/P) = 600. Should Y rise to 4,200, the same quantity of real money balances

We can infer that the government is following a restrictive fiscal policy when

An increase in the marginal propensity to consume would cause the IS curve to

Suppose that banks pay 4 percent interest on checking accounts while U.S. Savings Bonds pay 6 percent interest. Under these conditions

Suppose we have normally-sloped IS and LM curves intersecting at point A. Then a monetary policy change shifts the LM curve to the right. Directly below point A we find a point on the new LM curve that shows us

During the expansion phase of the business cycle, business firms become optimistic about their future earning capacity as do banks. Nominal interest rates rise during expansions. Investment lending could be expected to

When (if at all) can the crowding-out effect be prevented?

In the IS-LM model, equilibrium income can be affected by

Which of the following would cause the IS curve to shift?

Which variable is assumed to remain exogenous in all the models constructed in Chapters 3 and 4?

An increase in the money supply will

Which of the following statements would be true of an economy that can be characterized as being to the left of the IS curve?

A steep LM curve implies that

Figure 4-10 -In the figure above, if the Fed's goal is to hold income constant, contractionary fiscal policy combined with the Fed's response takes us from points

A vertical IS curve comes from the assumption that changes in the interest rate do not affect

Suppose the demand for money becomes less sensitive to changes in the interest rate. In moving along an LM curve, an increase in income must be accompanied by a ________ change in the interest rate than before, meaning that the LM curve has become ________.

Figure 4-1 -If there is unplanned inventory accumulation there is excess