Macroeconomics 5th Edition by Olivier Blanchard

Exercise 1

Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly.
a. The main determinants of investment are the level of sales and the interest rate.
b. If all the exogenous variables in the IS relation are constant, then a higher level of output can be achieved only by lowering the interest rate.
c. The IS curve is downward sloping because goods market equilibrium implies that an increase in taxes leads to a lower level of output.
d. If government spending and taxes increase by the same amount, the IS curve does not shift.
e. The LM curve is upward sloping because a higher level of the money supply is needed to increase output.
f. An increase in government spending leads to a decrease in investment.
g. Government policy can increase output without changing the interest rate only if both monetary and fiscal policy variables change.