Solved

Use the Following to Answer Questions

Question 20

Multiple Choice

Use the following to answer questions :
Exhibit: Policy Interaction Use the following to answer questions : Exhibit: Policy Interaction -(Exhibit: Policy Interaction) Based on the graph, starting from equilibrium at interest rate r<sub>3</sub>, income Y<sub>2</sub>, IS<sub>1</sub>, and LM<sub>1</sub>, if there is an increase in government spending that shifts the IS curve to IS<sub>2</sub>, then in order to keep the interest rate constant, the Federal Reserve should _____ the money supply shifting to _____. A) increase; LM<sub>2</sub> B) decrease; LM<sub>2</sub> C) increase; LM<sub>3</sub> D) decrease; LM<sub>3</sub>
-(Exhibit: Policy Interaction) Based on the graph, starting from equilibrium at interest rate r3, income Y2, IS1, and LM1, if there is an increase in government spending that shifts the IS curve to IS2, then in order to keep the interest rate constant, the Federal Reserve should _____ the money supply shifting to _____.


A) increase; LM2
B) decrease; LM2
C) increase; LM3
D) decrease; LM3

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Q15: Two identical countries, Alpha and Beta, can

Q16: How can the Fed keep the economy

Q17: If the LM curve is vertical and

Q18: Assume that initially everyone expects the price

Q19: The slope of the IS curve depends

Q21: All of the following may have contributed

Q22: Use the IS-LM model to illustrate graphically

Q23: In the IS-LM model, a decrease in

Q24: If the congress announces a rise in

Q25: An increase in government spending raises income:<br>A)