Reading Check 3 - In the IS-LM model with fixed prices. If...

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Question 1 In the IS-LM, with fixed prices. If there is an increase in taxes a. IS will shift to the right. b. IS will shift to the left.* c. LM will shift to the right. d. LM will shift to the left. Question 2 According to the Keynesian Theory (within IS-LM, fixed prices) an exogenous reduction in the money supply is most likely to: a. increase interest rates, investment and aggregate spending. b. increase interest rate, and lower investment and aggregate spending.* c. reduce interest rate and increase investment and aggregate spending. d. reduce interest rate, investment and aggregate spending. Question 3
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Unformatted text preview: In the IS-LM model with fixed prices. If the demand for money is Md=50+0.2Y-10r, and there is a 10 unit increase in the money supply, then the LM will shift to the right by: a. 10 units b. 50 units* c. 40 units d. 0 units Question 4 The lower the interest rate sensitivity of the demand for money, the a. More effective is fiscal policy and the less effective is monetary policy. b. More effective is monetary policy and the less effective is fiscal policy.* c. Less effective are both monetary and fiscal policy. d. More effective are both monetary and fiscal policy....
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This note was uploaded on 06/16/2011 for the course ECON 420 taught by Professor Na during the Summer '11 term at University of North Carolina School of the Arts.

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