Home > CompTIA A+ Exam > Quizzes > Money, Banking, and Financial Markets Practice Test: Monetary and Fiscal Policy in the IS-LM Model
Money, Banking, and Financial Markets Practice Test: Monetary and Fiscal Policy in the IS-LM Model
Fast practice, instant feedback. Timer auto-submits when time’s up.
Avg score: 0% • Most missed: “As bonds become a riskier asset, the demand for money ________ and, all else con…”
The IS-LM model, or Hicks-Hansen model, is a two-dimensional model that shows the relationship between interest rates, output, and the money market in a closed economy. The IS curve represents the equilibrium in the goods market, and the LM curve represents the equilibrium in the money market. For example, an expansionary monetary policy can shift the LM curve to the right, resulting in lower interest rates and higher output.  The IS-LM model can be used to analyze the effects of monetary and fiscal policy. For example, fiscal policy causes changes in the IS curve, which results in changes... Show more
Money, Banking, and Financial Markets Practice Test: Monetary and Fiscal Policy in the IS-LM Model
Time left 00:00
25 Questions

1. Everything else held constant, a decrease in the price level will ________.
2. In the Keynesian cross diagram, an increase in autonomous consumer expenditure causes the aggregate demand function to shift ________, the equilibrium level of aggregate output to rise, and the IS curve to shift to the ________, everything else held constant.
3. An autonomous appreciation of the U.S. dollar makes American goods ________ expensive relative to foreign goods which ________ net exports in the U.S.
4. An increase in autonomous consumer expenditure causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________, everything else held constant.
5. A decline in the money supply shifts the LM curve to the left, causing the interest rate to________ and output to ________, everything else held constant.
6. In deriving the aggregate demand curve a ________ price level ________ the money supply in real terms, raises interest rates, and ________ the equilibrium level of aggregate output.
7. If the price level decreases, everything else held constant, the ________ curve shifts to the________.
8. In the long-run ISLM model and with everything else held constant, the long-run effect of a contractionary fiscal policy is to ________ real output and ________ the interest rate.
9. The aggregate demand curve has the usual downward slope, since a ________ price level________ the real money supply, raises interest rates, and lowers the equilibrium level of aggregate output, everything else held constant.
10. In the Keynesian cross diagram, a decline in autonomous consumer expenditure causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to________, everything else held constant.
11. The relationship between the price level and the quantity of aggregate output for which the goods and money markets are in equilibrium is called the ________.
12. In the long-run ISLM model and with everything else held constant, the long-run effect of an autonomous fall in consumption expenditure is to ________ real output and ________ the interest rate.
13. The less interest-sensitive is money demand, the ________.
14. An increase in the quantity of money supplied shifts the money supply curve to the ________ and the LM curve to the ________, everything else held constant.
15. The aggregate demand curve has the usual downward slope, since a higher price level reduces the real money supply, ________ interest rates, and ________ the equilibrium level of aggregate output, everything else held constant.
16. Referring to the Economic Stimulus Act of 2008, the expansionary effect of the government stimulus was overwhelmed by the continuing deterioration in credit market conditions. Everything else held constant and using the ISLM model, the net effect would cause the________ curve to ________ and output will ________.
17. In the long-run ISLM model and with everything else held constant, the long-run effect of a fall in net exports is to ________ real output and ________ the interest rate.
18. If an economy experiences high interest rates and high unemployment, the ISLM framework predicts that ________ policy has been too ________.
19. Other things equal, a decrease in autonomous consumption shifts the ________ curve to the________.
20. In the Keynesian cross diagram, a decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift down, the equilibrium level of aggregate output to ________, and the IS curve to shift to the________, everything else held constant.
21. In the long-run ISLM model and with everything else held constant, the long-run effect of an expansionary monetary policy is to ________.
22. Everything else held constant, an increase in government spending will cause ________.
23. A decline in autonomous planned investment spending causes the equilibrium level of aggregate output to ________ and shifts the ________ curve to the ________, everything else held constant.
24. Everything else held constant, a purchase of government securities by the Fed will cause________.
25. In the Keynesian cross diagram, an increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift________ and the equilibrium level of aggregate output to ________, everything else held constant.

⚡ Recently practiced quizzes in this topic
Live quiz activity
Comptia A+ Port Numbers CompTIA A+ Windows Command Line A+ Guide To IT Technical Support Glossary CompTIA A+ Certification 802 Exam Practice CompTIA A+ 220-801 Exam A+ Guide To IT Technical Support - Network Hardware CompTIA A+ 220-901 Exam Practice Questions CompTIA A+ 220-901 Practice Questions Comptia A+ 220-902 Exam Terms A+ Guide To IT Technical Support - Hard Drives and Other Storage Devices
 
❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

🌈  Our mission is to help improve your scores in any subject and exam withonline quizzes, practice tests, study guides, & advice for students. Since 2018.
About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | What Should We Know?
Privacy | Terms |
Without work one finishes nothing. - Ralph Waldo Emerson
© 2026 Fatskills.com

All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.