A change that increases the real money supply

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18. A change that increases the real money supply relative to real money demand causes (a) the LM curve to shift down and to the right. (b) the LM curve to shift up and to the left. (c) the IS curve to shift down and to the left. (d) the IS curve to shift up and to the right. Answer: A Level of difficulty: 1 Section: 9.3 19. A change that increases real money demand relative to the real money supply causes
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136 Abel/Bernanke • Macroeconomics, Fifth Edition 20. You have just read that the Federal Reserve has increased the money supply to avoid a recession. For a given price level, you would expect the LM curve to 21. The Fed has announced that it plans to lower the rate of monetary growth from 10% per year to 2% per year. You would expect this announcement to directly 22. An increase in wealth that doesn’t affect labor supply would cause the IS curve to _____ and the FE line to _____. (a) shift down and to the left; be unchanged (b) shift down and to the left; shift left (c) shift up and to the right; be unchanged (d) shift up and to the right; shift left Answer: C Level of difficulty: 1 Section: 9.4 23. An increase in the effective tax rate on capital would cause the IS curve to _____ and the LM curve to _____. 24. When all markets in the economy are simultaneously in equilibrium, we say
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Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis 137
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