Question

7. Everything else held constant, if aggregate output is to the right of the LM curve, then there is an excess of money which will cause the interest rate to A) supply; fall- B) supply; rise- C) demand; fall- D) demand; rise- t 8. If the economy is on the LM curve, but is to the right of the IS curve, aggregate output will and the interest rate will A) rise; rise- B) rise; fall C) fall; rise D) fall; fall t 9. If the Federal Reserve conducts open market sales, the money supply shifting the LM curve to the everything else held constant. A) decreases; right: B) decreases; left C) increases; right- D) increases; left +

It is not necessary to write detail answer, some question is easy to find answer, you dont need to explain in detail, thank you :)

Answer 1

7. Here, it is given that the other things are constant and aggregate output is to the right of the LM curve, it explains that the aggregate demand increases in the economy due to which people demand more money to satisfy their demand. Therefore, there will be excess demand for money in the economy. Increased demand will lead to raising the interest to stabilize the economy and moving towards the equilibrium.

Therefore, the correct of is D) demand; rise.

8. Given that, the economy is on the LM curve, but it is to the right of the IS curve. There is an upward-sloping LM curve, and downward sloping IS that explains that the right side of the IS curve shows a higher output level in the economy due to which aggregate demand increases. Increase in aggregate demand increases the demand for money in the economy, which further lead to an increase in the interest rate in the economy.

Therefore, the correct option is A) rise; rise.

9. Open market operation refers to the monetary policy of the Federal Reserves that is used to stabilize the money supply in the economy. Federal Reserve uses open market operation by buying or selling government securities. Open market sales are the policy under which the Fed sells government securities in the economy due to which people hold lesser money in hand that will decrease the money supply in the economy. Hence, the LM curve shifts leftward due to reduced money supply.

Therefore, the correct option is B) decreases; left.

10. Change in net exports affects the IS curve, while the change in money demand affects the LM curve. Therefore, to shifts the LM curve, in this case, there will be an autonomous rise in the money demand in the economy and increased money demand allow the Federal Reserve to increase the money supply in the market due to which the LM curve shifts rightward.

Therefore, the correct option is C) money demand; right.

As per the HOMEWORKLIB RULES, first four questions are answered.