ECON2P22_TutorialQuestions_Set_5.pdf - ECON 2P22 Intermediate Macroeconomics I Fall 2019 Tutorial Questions Set No 5 The IS-LM model Week of October

ECON2P22_TutorialQuestions_Set_5.pdf - ECON 2P22...

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1 ECON 2P22: Intermediate Macroeconomics I Fall 2019 Tutorial Questions: Set No. 5 The IS-LM model Week of October 21 st , 2019 These tutorial questions are aimed at further reinforcing understanding of policy issues in relation to the IS-LM model. You will need to read Chapter 5 of the textbook to answer these questions. Question 1: IS-LM related concepts Explain the meaning of the following concepts in relation to the IS-LM model: (a)Expansionary fiscal policy (b)Crowding out effect (c)Liquidity trap (d)Equilibrium in the goods market (e)Equilibrium in financial markets Question 2: True/false/uncertain (a)Along the IS curve the financial market is in equilibrium (b)Along the LM curve the goods market is in equilibrium (c)An increase in government spending coupled with an increase in money supply will lead to an increase in equilibrium output

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