Question

OY 10. By referring to Figure 7-1, an increase in the money stock a shifts the LM schedule to the right from LMoto LM b shifts the LM schedule to the left from LMo to LM e leaves the LM curve unchanged at LM. d. shifts neither the IS nor the LM schedule. 11. Changes in all of the following shift the LM curve except a. the price level. b. income. c. the money supply. d. money demand. e. all of the above shift LM curve. JM is2 Y", Yo Y Y

Answer 1

(10) (a)

Higher stock of money incraeses money supply, shifting LM curve to right.

(11) (e)

LM curve will shift to right (left) if: Price level falls (rises), income rises (falls), money supply rises (falls) or money demand falls (rises).

(12) (c)

Spending multiplier = 1 / (1 - b)

When G rises, IS shifts rightward by [G x 1 / (1 - b)].

(13) (A)

IS curve is locus of all combinations of (r, Y) for which goods market is in equilibrium.

NOTE: As HOMEWORKLIB's Policy, only 1st 4 MCQs are answered.