Exam 26: The ISLM Model

In the long-run ISLM model and with everything else held constant,the long-run effect of an expansionary fiscal policy is to ________ real output and ________ the interest rate.

Crowding out will be more pronounced the closer to vertical is the

In the long-run ISLM model and with everything else held constant,the long-run effect of an autonomous increase in investment is to ________ real output and ________ the interest rate.

The less interest-sensitive is money demand,the

As bonds become a riskier asset,the demand for money ________ and,all else constant,the equilibrium interest rate ________.

Everything else held constant,a monetary expansion is characterized by ________ output and ________ interest rates.

In the long-run ISLM model and with everything else held constant,the long-run effect of a cut in government spending is to ________ real output and ________ the interest rate.

When the central bank ________ the money supply,the LM curve shifts to the right,interest rates ________,and equilibrium aggregate output ________,everything else held constant.

A contractionary monetary policy shifts the LM curve to the ________,reducing ________,everything else held constant.

Everything else held constant,if aggregate output is to the left of the LM curve,then there is an excess ________ of money which will cause the interest rate to ________.

The rate of output at which the price level has no tendency to rise or fall is called the

In the long-run ISLM model and with everything else held constant,the long-run effect of a tax cut is to ________ real output and ________ the interest rate.

If the Federal Reserve conducts open market ________,the money supply ________,shifting the LM curve to the right,everything else held constant.

If an economy experiences high interest rates and high unemployment,the ISLM framework predicts that ________ policy has been too ________.

In the long-run ISLM model and with everything else held constant,the long-run effect of a contractionary fiscal policy is to ________ real output and ________ the interest rate.

The situation in which expansionary fiscal policy does not lead to a rise in aggregate output is referred to as

As aggregate output rises,the demand for money ________ and the interest rate ________,so that money demanded equals money supplied and the money market is in equilibrium.

If the ________ curve is relatively more unstable than the ________ curve,a money supply target is preferred.

Everything else held constant,if aggregate output is to the ________ of the LM curve,then there is an excess ________ of money which will cause the interest rate to fall.

An increase in the money supply shifts the LM curve to the right,causing the interest rate to ________ and output to ________,everything else held constant.