Shifts in the IS-LM Curve

A smaller real money supply results in what type of AD curve?

A downward sloping curve EXPLANATION The AD curve is a very powerful tool because it indicates the points at which equilibrium is achieved in the markets for goods and money at a given price level. It slopes downward because a high price level, ceteris paribus, means a small real money supply, high interest rates, and a low level of output. A low price level, all else constant, is consistent with a larger real money supply, low interest rates, and higher output.

A larger real money supply results in what type of AD curve?

An upward sloping curve EXPLANATION The AD curve is a very powerful tool because it indicates the points at which equilibrium is achieved in the markets for goods and money at a given price level. It slopes downward because a high price level, ceteris paribus, means a small real money supply, high interest rates, and a low level of output. A low price level, all else constant, is consistent with a larger real money supply, low interest rates, and higher output.

Which outcome is strongly correlated with high demand for money?

Financial panic

Financial panic is strongly correlated with which of the following outcomes?

High demand for money EXPLANATION During financial crisis, the LM curve will shift left, with raising interest rates and decreasing output, and demand for money increases.

When there is an increase in the money supply, what effect can be expected?

Increased output

Which of the following is expected when there is an increase in the money supply?

Increased output

Monetary stimulus is strongly associated with which of the following scenarios?

Monetary stimulus leads to lower interest rates.

Which scenario is strongly associated with a monetary stimulus?

Monetary stimulus leads to lower interest rates. EXPLANATION Monetary stimulus, that is, increasing the money supply, causes the LM curve to shift right, resulting in higher output and lower interest rates.

The AD curve slopes downward because a low price level means what?

Smaller real money supply

The AD curve slopes downward because a low price level means what?

Smaller real money supply EXPLANATION The AD curve is a very powerful tool because it indicates the points at which equilibrium is achieved in the markets for goods and money at a given price level. It slopes downward because a high price level, ceteris paribus, means a small real money supply, high interest rates, and a low level of output. A low price level, all else constant, is consistent with a larger real money supply, low interest rates, and higher output.

The aggregated demand (AD) curve is best described by which statement?

The AD curve represents IS-LM equilibrium points.

Which of the following statements gives the correct description for the aggregated demand (AD) curve?

The AD curve represents IS-LM equilibrium points.

According to economic experts, which of the following is an example of long-run monetary neutrality?

When the output and the interest rate are the same but prices are higher

Which of the following is an example of long-run neutrality as described by economists?

When the output and the interest rate are the same but prices are higher