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

In the early stages of macroeconomic model building, the money supply is regarded as a policy ________ that is under ________ control by the Federal Reserve.

A flat LM curve implies that

Suppose the government increases its expenditures by $100 million and finances the resulting deficit by selling bonds. Then the LM curve will

At all points below the current LM curve,

Figure 4-6 -In the figure above, with IS0 shifting to IS1 against the upward-sloping LM curve, at point 1

From an initial IS-LM equilibrium with a normally-sloped IS curve and a vertical LM curve, the money supply increases. A the new IS-LM equilibrium we have

Monetary restraint and fiscal stimulus will

An increase in real GDP causes the demand for real money balances to

The "crowding-out" effect refers to the fact that

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

With normally-sloped IS and LM curves, an increase in government expenditure ________ consumption expenditure since autonomous consumption ________ while induced consumption ________.

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

Monetary policy will have a large income effect provided the

Should net exports fall,

From an initial IS-LM equilibrium with normally-sloped IS and LM curves, the money supply falls. At the new IS-LM equilibrium we have some combination of a ________ income and a ________ interest rate.

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

In the IS-LM model, the fiscal multiplier effect can be increased by

Fiscal policy makers may indirectly control the money supply if

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

A "tight" money, easy "fiscal" policy combination will be preferred by society which values