Chapter 9
Fall in output in the short run.
Decrease in government purchases
Increase in output in the short run.
Decrease in taxes
Beneficial Supply Shock
FE line right
Increase in capital stock
FE line right
Increase in labour supply
FE line right
More output being produced
Full employment output increases
Rise in MPN (labor)
Full employment output increases
increase in taxes
IS curve down and left
Decrease in desired saving
IS curve up and right
Increase in expected future MPC (capital)
IS curve up and right
Increase in expected future output
IS curve up and right
Increase in wealth
IS curve up and right
Temp increase in gov't purchases
IS curve up and right
decline in taxes
IS curve up and right
decrease in effective tax rate on capital
IS curve up and right
Increase in output in the short run..
Increase in expected inflation
Decrease in expected inflation rate
Increase in money demand
Fall in output in the short run
Increase in money demand
Increases in the supply of money
LM curve shifts down and right
Decrease in the supply of money
LM curve shifts up and left
Expected inflation and real interest rate
Negative relationship
Money supply and LM curve
Negative relationship
Money supply and interest rate
Negative relationship
Money supply and output in short run
Negative relationship
Money supply and real money demand
Negative relationship
Ricardian equivalent shift
No change in IS curve
Money supply and output in the long run
Not correlated
Money supply and price level in the short run
Not correlated
AD Curve with IS + CM intersection
Positive relationship
Interest rate and IS curve
Positive relationship
Interest rate, real money demand, and LM Curve
Positive relationship
Price level and LM curve
Positive relationship
An adverse supply shock causes general equilibrium to
Shift LM curve up
If IS and LM intersect and the left of the FE line
decrease in price level, shifting LM down
Ricardian equivalent
if consumers take into account an offsetting future tax cut and do not change consumption
Increase in output in the short run
increase in money supply
If IS and LM intersect and the right of the FE line
increase in price level, shifting LM up
Tempe adverse supply shock (price levels)
increases
Tempe adverse supply shock (real interest rate)
increases
Rise in interest rates
money demand rises
Tempe adverse supply shock (investment)
reduces
Tempe adverse supply shock (national saving)
reduces
Tempe adverse supply shock (output)
reduces
What factors shift AD
same factors that shift IS curve and LM curve
Temp adverse supply shock initially
shifts FE line to the left
A permanent supply shock
shifts IS curve plus the curves shifted by the temporary shock