Exam 26: The ISLM Model

An increase in the quantity of money supplied shifts the money supply curve to the ________ and the LM curve to the ________,everything else held constant.

An increase in the money supply,other things equal,shifts the ________ curve to the ________.

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

An increase in the quantity of money supplied shifts the money supply curve to the ________,and the equilibrium interest rate ________,everything else held constant.

An autonomous rise in ________ shifts the LM curve to the ________,everything else held constant.

The ________ describes the combinations of interest rates and aggregate output for which the quantity of money demanded equals the quantity of money supplied.

If the price level increases,everything else held constant,the ________ curve shifts to the ________.

Using the ISLM model,explain and show graphically the effect of a fiscal expansion when the demand for money is completely insensitive to changes in the interest rate.What is this effect called?

If the Fed adopts a policy of pegging the interest rate,a ________ in government spending forces the Fed to increase the money supply to prevent interest rates from ________.

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

When the IS and LM curves are combined in the same diagram,the intersection of the two curves determines the equilibrium level of ________ as well as the ________.

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

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

In the long-run ISLM model and with everything else held constant,as long as the level of output ________ the natural rate level,the price level will continue to ________,shifting the LM curve to the ________,until finally output is back at the natural rate level.

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

In the ISLM framework,an expansionary monetary policy causes aggregate output to ________ and the interest rate to ________,everything else held constant.

An autonomous increase in money demand,other things equal,shifts the ________ curve to the ________.

Show graphically and explain why targeting an interest rate is preferable when money demand is unstable and the IS curve is stable.

In the Keynesian model the quantity of money demanded is ________ related to income and ________ related to the interest rate.

In the ISLM framework a contractionary fiscal policy causes aggregate output to ________ and the interest rate to ________,everything else held constant.