SOLVED

24.5Â Â ISLM and Aggregate Demand 1) The ISLM model can be used to derive A) aggregate demand. B) aggregate supply. C) the money multiplier. D) the long-run economic growth rate. 2) With a rise in government expenditure we A) move up along an aggregate demand curve. B) move down along an aggregate demand curve. C) shift the aggregate demand curve to the right. D) shift the aggregate demand curve to the left. 3) With a decrease in government expenditure we A) move up along the aggregate demand curve. B) move down along the aggregate demand curve. C) shift the aggregate demand curve to the right. D) shift the aggregate demand curve to the left. 4) A higher price level causes us to A) move up along an aggregate demand curve. B) move down along an aggregate demand curve. C) shift the aggregate demand curve to the right. D) shift the aggregate demand curve to the left. 5) A lower price level causes us to A) move up along the aggregate demand curve. B) move down along the aggregate demand curve. C) shift the aggregate demand curve to the right. D) shift the aggregate demand curve to the left. 6) With a rise in government expenditure we A) move up along an aggregate demand curve. B) move down along an aggregate demand curve. C) shift the aggregate demand curve to the right. D) shift the aggregate demand curve to the left. 7) With a decrease in government expenditure we A) move up along the aggregate demand curve. B) move down along the aggregate demand curve. C) shift the aggregate demand curve to the right. D) shift the aggregate demand curve to the left. 8) A higher price level causes us to A) move up along an aggregate demand curve. B) move down along an aggregate demand curve. C) shift the aggregate demand curve to the right. D) shift the aggregate demand curve to the left. 9) A lower price level causes us to A) move up along the aggregate demand curve. B) move down along the aggregate demand curve. C) shift the aggregate demand curve to the right. D) shift the aggregate demand curve to the left. 24.6Â Â Appendix: The Simple Algebra of Income Determination 1) In the complete algebraic formulation of ISLM, A) the government spending multiplier is greater than the tax mulitplier as long as b <1. B) the government spending mulitplier is less than the tax multiplier as long as b<1. C) monetary policy is always more powerful than fiscal policy. D) fiscal policy is always more powerful than monetary policy. 2) In the complete algebraic formulation of ISLM, A) monetary policy is useless when h is infinite or n is zero. B) monetary policy is useless when n is infinite or h is zero. C) fiscal policy is useless when h is infinite or n is zero. D) both fiscal and monetary policy are useless.