Exam 25: Money and Economic Stability in the ISLM World

The natural rate of interest falls with a __________ shift of the __________ curve.

Fluctuating interest rates tend to cause large changes in real output when the

Monetarists believe in a relatively unstable __________ curve, and thus recommend a monetary policy targeting the __________.

Suppose that IS and LM intersect at full-employment output. A leftward shift of LM will be followed by a __________ price level that shifts LM to the __________ in a return to full employment.

The natural rate of interest is a __________ rate that __________ inflationary expectations.

The LM curve automatically shifts to the left when the intersection point of the IS and LM curves occurs at a point

An upward-sloping LM curve implies that the expenditure multiplier, when compared with the simple Keynesian expenditure multiplier, is

If the LM curve is subject to wider fluctuations than the IS curve, the Federal Reserve could minimize GDP fluctuations by targeting

The natural rate of interest rises with a __________ shift of the __________ curve.

The expenditure multiplier in the ISLM framework is smaller than that derived from the simple Keynesian model because

Monetary policy is impotent when the LM curve is

Which of the following will increase the natural rate of interest?

Monetarists argue that the demand for money is unresponsive to interest rates, i.e. depends on income only, produces a

When the economy is at full employment __________ interest rates are __________ by an expansionary monetary policy if inflationary expectations are generated.

Suppose that IS and LM intersect at full-employment output. A rightward shift of IS will be followed by a __________ price level that shifts LM to the __________ in a return to full-employment.

"A rise in the money supply raised output in the short run, but left output unaffected in the long run." This statement implies that the price level __________ in the long run, causing the interest rate to __________.

A horizontal LM curve implies that the expenditure multiplier, when compared with the simple Keynesian expenditure multiplier, is

The LM curve automatically shifts to the right when the intersection point of the IS and LM curves occurs at a point

With a change in the money supply, a vertical LM curve shifts a horizontal distance equal to

When the LM curve is vertically sloped, the __________ in income due to a change in the money supply will be __________ when the LM curve is positively sloped, but not vertical.