the economics of money, banking, and financial markets

880 #

© 2014 Pearson Canada Inc.#

Economics of Money, Banking & Financial Markets, 5e (Mishkin)
Chapter 28 WEB CHAPTER: The ISLM Model

28.1 Keynes's Fixed Price Level Assumption and the IS Curve

1. 
   

   The key assumption in the ISLM model is that ____.
   A) the price level is fixed
   B) the inflation rate is zero
   C) there is no role for interest rates
   D) Both A and B.
   Answer: D
   Diff: 1 Type: MC Page Ref: 1
   Skill: Recall
   Objective List: WEB CHAPTER: The ISLM Model

   
   


2. 
   

   The money market is in equilibrium ____.
   A) at any point on the IS curve
   B) at any point on the LM curve
   C) at only one point on the LM curve
   D) only at the intersection of the IS and LM curves
   Answer: B
   Diff: 2 Type: MC Page Ref: 2
   Skill: Recall
   Objective List: WEB CHAPTER: The ISLM Model

   
   


3. 
   

   The ____ describes the combinations of interest rates and aggregate output for which the
   quantity of money demanded equals the quantity of money supplied.
   A) IS curve
   B) LM curve
   C) consumption function
   D) investment schedule
   Answer: B
   Diff: 2 Type: MC Page Ref: 2
   Skill: Recall
   Objective List: WEB CHAPTER: The ISLM Model

   
   


4. 
   

   In the Keynesian model the quantity of money demanded is ____ related to income and
   ____ related to the interest rate.
   A) positively; positively
   B) positively; negatively
   C) negatively; negatively
   D) negatively; positively
   Answer: B
   Diff: 2 Type: MC Page Ref: 2
   Skill: Recall
   Objective List: WEB CHAPTER: The ISLM Model