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8 Cards in this Set

  • Front
  • Back
if congress passed a tax increase at the request of the president to rduce the budget deficit, but the Fed held the money supply constant, then the two policies together would generally lead to ___income and a ___interest rate
lower, lower
the great depression of the U.S.
cannot be considered to have started becasue of a leftward shift in the LM curve because real balances did not fall between 1929 and 1931
a tax cut combined with tight money, as was the case in the early 80's, should lead to
a rise in the real interest rate and a fall in investment
according to the theory of liquidity preference, the supply of real money balances:
is fixed
the IS curve may be interpreted as showing the:
interest rate that equilibrates the market for loanable funds for given income
the LM curve, in the usual case:
slopes to the right
according to the quantity equation, if velocity is not assumed to be constant and money supply is held constant, then an increase in the interest rate___velocity and ____income
increases, increases
The IS and LM curves together generally determine
both income and interest rate