MGEB06H3 Chapter : Week 9 chapter notes

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lavenderdonkey6

6 Dec 2010

School

UTSC

Department

Economics for Management Studies

Course

MGEB06H3

Professor

Jack Parkinson

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Document Summary

Chapter 11: aggregate demand ii: applying the is-lm model notes the intersection of the is curve and the lm cure determines the level of national income. N when one of these curves shifts, the sr equilibrium of the economy changes, and national income fluctuates. How monetary policy shifts the lm curve and changes the short-run equilibrium. N monetary transmission mechanism the process by which changes in the money supply influence the amount that households. 11. 2 is-lm as a theory of aggregate demand. From the is-lm model to the aggregate demand curve. The money hypothesis again: the effects of falling prices. Summary: the is-lm model is a general theory of the aggregate demand for goods and services. The exogenous variables in the model are fiscal policy, monetary policy, and the price level. The lm curve represents the positive relationship between the interest rate and the level of income that arises from equilibrium in the market for real money balances.

Related Questions

According to the interest-rate-based monetary policy transmission mechanism, an increase in the money supply generates:

a. lower interest rates, which causes an increase in planned real investment spending and an increase in aggregate demand.

b. spending on consumer goods and services directly, which causes an increase in aggregate demand.

c. an increase in nominal GDP and a change in the price level, but no change in real GDP.

d. an increase in aggregate supply since the supply of money is part of aggregate supply.

azuregerbil469

The aggregate demand curve indicates the relationship between

a. the interest rate and the amount of loanable funds demanded by borrowers.

b. the natural rate of unemployment and the demand for goods and services when the economy is in long-run equilibrium.

c. the real wage rate and the quality of resources demanded by producers of goods and services.

d. the general price level and the aggregate quantity of goods and services demanded.

brownlion99

The steps in the transmission of monetary policy are

A. Congress increases government expenditures on goods and services, leading to an increase in aggregate demand.
B. Congress increases the budget deficit, which increases the money supply, which increases aggregate supply.
C. Congress increases the money supply, which lowers the interest rate, and leads to an increase in aggregate demand.
D. The Federal Reserve lowers the federal funds rate, which lowers the real interest rate, and leads to an increase in aggregate demand.
E. The Federal Reserve increases government expenditures on goods and services, leading to an increase in aggregate demand.

erinmallard110

MGEB06H3 Chapter : Week 9 chapter notes

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