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

A change in the interest rate will generally affect the

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

Figure 4-5 -In the figure above, at what income would the interest rate that brings about money market equilibrium cause unwanted inventories of commodities to accumulate?

The IS curve would be vertical if

Figure 4-5 -In the figure above, suppose that real income is YB and the money market is in equilibrium. The interest rate at this point is ________ to support commodity market equilibrium, so that involuntary inventory changes are ________.

During the recession phase of the business cycle, households become pessimistic about their future earning capacity as do banks. Nominal interest rates fall during recessions. Mortgage lending could be expected to

A lower nominal money supply is equally demanded, given each interest rate, at a ________ level of income, meaning that the LM curve has shifted to the ________.

A flat IS curve implies that

The practice of "monetizing the debt" is traditionally feared because it is thought to cause

The economy is in short-run equilibrium

Which of the following statements would be true for an economy that can be characterized as being to the right of its LM curve?

A change in the multiplier (k) will change the

Figure 4-6 -In the figure above, with IS0 shifting to IS1 against the upward-sloping LM curve, crowding-out is the result that

A decrease in real GDP causes

From any point below the current LM curve, money market equilibrium can be restored by some combination of a ________ income and a ________ interest rate that ________ the demand for money.

Figure 4-7 -Using the information contained in the figure above, the initial equilibrium Y is 3500. If there is 500 of new fiscal stimulus and a constant money supply, Y will increase to ________ and the interest rate will ________.

When the demand for money becomes less responsive to changes in income, the LM curve becomes ________ and it also shifts to the ________.

Figure 4-8 -If Figure above is to show the result of a "fully accommodating" monetary policy following a shift of the IS curve from IS0 to IS1, what is the initial level of real income and interest rate before these changes?

Figure 4-5 -In the figure above, the money market is in equilibrium

If a given fiscal policy is fully accommodated by monetary policy, then