1 ECON 2P22: Intermediate Macroeconomics I Fall 2019 Review Questions: Set No. 4 IS-LM Model These review questions are aimed at further reinforcing understanding of the IS-LM model which entails equilibrium in both the goods market and the financial market. To answer these questions it is helpful to read the material covered in Chapter 5 of the textbook. Question 1: True/False/Uncertain (a)According to the IS-LM model, an increase in money supply will lead to an increase in output (b)If the LM curve is vertical, expansionary fiscal policy has no effect on output. Hint: Draw the IS and LM curves and shift the IS curve to the right in conformity with expansionary fiscal policy. Recall that expansionary fiscal policy (i.e. increasing government spending or cutting taxes) shifts the IS curve to the right. (c)If the IS curve is horizontal, expansionary monetary policy has no effect on output. Hint: Draw the IS and LM curves and shift the LM curve to the right in conformity with expansionary monetary policy. Recall that expansionary monetary policy (i.e.