Handout 10-
[Q1] If the economy is on the LM curve, but is to the right of the IS curve, then the ________ market is in equilibrium, but aggregate ________ exceeds aggregate ________.
A) goods; output; demand
B) goods; demand; output
C) money; output; demand
D) money; demand; output
[Q2] An increase in government spending causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________, everything else held constant.
A) rise; LM; right
B) rise; IS; right
C) fall; IS; left
D) fall; LM; left
[Q3] If the Federal Reserve conducts open market _______, the money supply _______, shifting the LM curve to the left, everything else held constant.
A) purchases; decreases
B) sales; decreases
C) purchases; increases
D) sales; increases
[Q4] An autonomous increase in money demand, other things equal, shifts the _______ curve to the_______.
A) IS; right
B) IS; left
C) LM; left
D) LM; right
[Q5] Which of the following statements concerning Keynesian IS-LM analysis is true?
A) Expansionary fiscal policy will cause the interest rate to fall.
B) A fall in the money supply shifts the LM curve to the right.
C) Changes in net exports arising from a change in interest rates causes a shift in the IS curve.
D) For a given change in taxes, the IS curve will shift less than for an equal change in government spending.
[Q6] A decrease in autonomous consumer expenditure causes the equilibrium level of aggregate output to ______ at any given interest rate and the shifts the ______ curve to the ______, everything else held constant.
A) rise; IS; right
B) fall; LM; left
C) rise; LM; right
D) fall; IS; left
[Q7] 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) Increases; fall; increases
B) decreases; rise; decreases
C) Increases; rise; decreases
D) decreases; fall; increases
[Q8] Aggregate output and the interest rate are ______ related to government spending and are ______ related to taxes.
A) negatively; negatively
B) positively; positively
C) positively negatively
D) negatively; positively