Exam 23: The Monetary Policy and Aggregate Demand Curves

A decline in the money supply shifts the MP curve to the left,causing the interest rate to ________ and output to ________,everything else held constant.

A decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________,everything else held constant.

A liquidity trap occurs when ________.

An increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ________,the equilibrium level of aggregate output to rise,and the IS curve to shift to the ________,everything else held constant.

Tightening monetary policy refers to ________.

The Taylor Principle differs from the Taylor rule because ________.

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

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

In the money market,a condition of excess supply of money can be eliminated by a ________ in aggregate output or a ________ in the interest rate,everything else held constant.

Describe non-conventional policies that could be implemented by the Bank of Canada when the policy rate approaches the lower bound.

Higher interest rates lead to reductions in the aggregate output due to ________.

The Taylor Principle states that central banks raise nominal rates by ________ than any rise in expected inflation so that real interest rates ________ when there is a rise in inflation.

The aggregate demand curve is derived from the ________.

If the monetary policy rule is given by r=1.0 + 0.5p,then 1.0 represents ________.

A decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift ________,the equilibrium level of aggregate output to fall,and the IS curve to shift to the ________,everything else held constant.

Because prices are slow to move in the short-run,when the Bank of Canada lowers the overnight rate,________.

The upward slope of the MP curve indicates that ________.

An increase in the interest rate due to Taylor principle changes result in ________.

Describe how the Bank of Canada would apply the Taylor principle.

In the IS-MP framework,an expansionary fiscal policy resulting from government purchases,causes aggregate output to ________ and the interest rate to ________,everything else held constant.