the economics of money, banking, and financial markets

888 #

© 2014 Pearson Canada Inc.#

19. 
    

    Everything else held constant, if aggregate output is to the ____ of the LM curve, then
    there is an excess ____ of money which will cause the interest rate to fall.
    A) right; supply
    B) right; demand
    C) left; supply
    D) left; demand
    Answer: C
    Diff: 2 Type: MC Page Ref: 3
    Skill: Recall
    Objective List: WEB CHAPTER: The ISLM Model

    
    


20. 
    

    Everything else held constant, if aggregate output is to the ____ of the LM curve, then
    there is an excess ____ of money which will cause the interest rate to rise.
    A) right; supply
    B) right; demand
    C) left; supply
    D) left; demand
    Answer: B
    Diff: 2 Type: MC Page Ref: 3
    Skill: Recall
    Objective List: WEB CHAPTER: The ISLM Model

    
    


21. 
    

    Discuss the IS-LM curves and how the equilibrium in the goods and money market is
    achieved.
    Answer: The IS curve shows the combination of interest rates and aggregate output such that the
    goods market is in equilibrium. The LM curve shows combinations of interest rates and output
    such that the money market is in equilibrium. At the intersection of the IS-LM curves is the
    interest rate and aggregate output that BOTH the goods and money markets are both in
    equilibrium and ceteris paribus, there is no pressure to move from that point. At any other point,
    one of the markets is not in equilibrium and there is pressure to move towards the IS-LM
    intersection.
    Diff: 2 Type: SA Page Ref: 4
    Skill: Recall
    Objective List: WEB CHAPTER: The ISLM Model