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

In constructing the planned autonomous demand schedule with the interest rate on the vertical axis, we begin with a vertical line at the value of

Since the velocity of money increases as interest rates rise the

The "velocity" of money is

"Real money balances" refers to

"Since checking accounts now pay interest they should not be included in the money supply." Given that checks are the major medium of exchange this statement is false because

Holding nonmonetary assets and converting them to money when necessary is justifiable so long as

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

Figure 4-10 -In the figure above, preferring the "easy money, tight fiscal" policy mix at a certain income is why we are at

In the IS-LM diagram, we are in "general equilibrium"

The LM curve is the set of combinations of ________ such that ________.

Figure 4-6 -In the figure above, with IS0 shifting to IS1, movement from points 0 to 2 requires the real money supply to ________.

In deriving LM curves, holding the real money supply constant while raising real GDP causes us to

In deriving an LM curve, higher incomes shift the money demand schedule to the ________, yet the unchanged real money supply continues to be equally demanded so long as the interest rate ________.

Along a downward-sloping money demand schedule, as the interest rate falls

With a rise in the interest rate,

Fully accommodating monetary policy results in

When the marginal propensity to save declines, the

An increase in the real money supply will have its maximum effect on the equilibrium level of GDP when the

Which of the following statements are true?

The effect on the IS curve of a reduction in taxes will be less the