Question

5. Which of the followings is not cause the aggregate supply curve to shift:

Select one:

a. higher government spending

b. expectations of inflation

c. tightness of the labor market

d. supply shocks unrelated to wages

The LM curve slopes upward, because higher aggregate output raises the demand for money and so raises the equilibrium interest rate.

Select one:

True?

False?

8. The LM curve slopes upward, because higher aggregate output raises the demand for money and so raises the equilibrium interest rate.

Select one:

True?

False?

10, What happens in the ISLM model if government impose an expansionary monetary policy?

Select one:

a. LM curve shifts to the right

b. LM curve shifts to the left

c. IS curve shifts to the left

d. IS curve shifts to the right

Answer 1

Q5) the answer is (a) higher government spending

This leads to an increase in the demand and causes the AD ot shift tot he right. there is no shift in the aggregate supply. All other options are incorrect as they will lead to a shift in aggregate supply.

Q8) The answer is true. This is the exact reason why the LM curve slopes upwards.

Q10) The answer is (a)

Moneetary policy does nto affect the IS curve. An expansionary monetary policy will shif the LM curve to the right (down).

All other options are incorrect as they do not correctly show the effects in ISLM model.