Chapter 24 Mishkin Summary 09/26/2013
1. TheIS curve is shifted to the right by a rise in autonomous consumer spending, a rise in planned
investment spending related to business confidence, a rise in government spending, a fall in taxes, or
an autonomous rise in net exports. A movement in the opposite direction of these five factors will shift
theIS curve to the left. 2. The LM curve is shifted to the right by a rise in the money supply or an autonomous fall in money
demand; it is shifted to the left by a fall in the money supply or an autonomous rise in money demand.
3. A rise in the money supply raises equilibrium output, but lowers the equilibrium interest rate.
Expansionary fiscal policy (a rise in government spending or a fall in taxes) raises equilibrium output,
but, in contrast to expansionary monetary policy, also raises the interest rate.
4. The less interestsensitive money demand is, the more effective monetary policy is relative to fiscal
5. The ISLM model provides the following conclusion about the conduct of monetary policy: When the
IS curve is more