Exam 24: The ISLM World

The transactions motive links money demand and

At __________ income levels on the LM curve, the interest rate must be __________.

Starting from equilibrium in the ISLM framework, a decrease in money demand results in

The two main determinants of money demand are

"The price level may fall but it will not necessarily lower the interest rate, not if we are in a liquidity trap." This is a statement a __________ economist might make as an explanation of why the economy __________ pull out of a recession.

The smaller the marginal propensity to consume, the

When the LM curve is vertical,

In the LM curve, the __________ the interest-sensitivity of liquidity preference, the __________ the necessary increase in the rate of interest to restore equilibrium.

At any point below the current LM curve there is an

Assume that the Cambridge k = 0.2. If income increases by $20,000, the demand for money will change by

A decrease in money demand will shift the

In the ISLM framework, a declining price level causes

In IS-LM analysis, the nominal interest rate is

Which of the following will cause the LM curve to shift to the right?

The LM curve shows points of equilibrium in the money market and combinations of

In the IS curve, at __________ income levels, saving is __________, so the interest rate must be __________ to expand investment.

Fiscal policy is most effective when

Suppose k = 0.2. With a $200 billion increase in the money supply, the LM curve shifts

With a decrease in government expenditure we

A lower price level causes us to