Chapter 13
The aggregate demand curve generally slopes downward and to the right because, for any given money supply M, a higher price level P causes a _____ real money supply M / P, which _____ the interest rate and _____ spending.
lower; raises; reduces
An increase in the money supply:
lowers the interest rate and increases income in the short run but leaves both unchanged in the long run.
A change in income in the IS-LM model resulting from a change in the price level is represented by a _____ aggregate demand curve, while a change in income in the IS-LM model for a given price level is represented by a _____ aggregate demand curve.
movement along the; shift in the
A movement along an aggregate demand curve corresponds to a change in income in the IS-LM model _____, while a shift in an aggregate demand curve corresponds to a change in income in the IS-LM model _____.
resulting from a change in the price level; at a given price level
The LM curve is steeper the _____ the interest sensitivity of money demand and the _____ the effect of income on money demand.
smaller; greater
The interaction of the IS curve and the LM curve determines:
the equilibrium level of the interest rate and output.
The slope of the IS curve depends on:
the interest sensitivity of investment and the marginal propensity to consume.
In the IS-LM model in a closed economy, an increase in government spending increases the interest rate and crowds out:
investment.
In the IS-LM model when M / P rises, in short-run equilibrium, in the usual case the interest rate _____ and output _____.
falls; rises
A liquidity trap occurs when:
interest rates fall so low that monetary policy is no longer effective.
A given increase in taxes shifts the IS curve more to the left the:
larger the marginal propensity to consume.
An increase in consumer saving for any given level of income will shift the:
IS curve downward and to the left.