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

If the demand for money was totally independent of the interest rate, the LM curve would ________ and monetary policy would ________.

Consider an initial IS-LM equilibrium with normally-sloped curves. An increase in government spending takes us to a new equilibrium with ________ income and ________ interest rate.

In constructing the planned autonomous demand schedule, which two components are assumed to depend on the interest rate?

The use of money ________ barter, and ________ economic specialization.

Consider an initial IS-LM equilibrium with normally-sloped curves. An increase in government spending shifts the ________ by a horizontal distance equal to the change in government spending ________.

Figure 4-5 -In the figure above, people would be trying to increase their holdings of money at

Money is assumed to earn

Moving upward along an LM curve, ________ quantity of real money balances is equally demanded as higher real incomes are accompanied by ________ interest rates.

Figure 4-3 -Employing Figure above, the initial equilibrium is point D and government expenditures increase by ________ shifting the IS curve from IS0 to IS1 and crowding out is approximately ________.

An increase in the money supply will raise equilibrium GDP if the

Figure 4-2 -Employing Figure above, the money market is initially in equilibrium at point G and after the economy moves to equilibrium, the Federal Reserve increases the money supply by 500. We would observe

Which of the following would shift the LM curve?

Autonomous planned spending includes five components of which two are dependent on the interest rates. These are:

If spending is not responsive to changes in the interest rate, then

A steep IS curve implies that

Suppose the Fed changes the interest rate in an attempt to raise planned investment. But in spite of this, planned investment remains unchanged. The most likely explanation is that

Figure 4-9 -In figure above, suppose LMA shifts to LMB. the distance from points A to L tells us

Which of the following events occur when fiscal expansion is used without accommodating monetary policy?

Suppose that Y = 4,000 and we are at a point on the money demand schedule where (M/P) = 600. Should Y fall to 3,900, the same quantity of real money balances

An increase in transfer payments would have the same short run effect on the government deficit as an equal