Home > General Studies (Hindi) > 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. 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.
2. Everything else held constant, a monetary contraction is characterized by ________ output and________ interest rates.
3. 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.
4. An increase in the money supply, other things equal, shifts the ________ curve to the ________.
5. The rate of output at which the price level has no tendency to rise or fall is called the ________.
6. If the Federal Reserve conducts open market purchases, the money supply ________, shifting the LM curve to the ________, everything else held constant.
7. In deriving the aggregate demand curve a ________ in the price level leads to ________ in the real money supply because the nominal quantity of dollars can purchase ________ goods and services.
8. Everything else held constant, a purchase of government securities by the Fed will cause________.
9. If the price level decreases, everything else held constant, the ________ curve shifts to the________.
10. If the quantity of money demanded is not affected by changes in the interest rate, the LM curve is ________ and fiscal policy will be ________.
11. A tax cut ________ disposable income, ________ consumption expenditure, and shifts the IS curve to the ________, everything else held constant.
12. Everything else held constant, changes in the interest rate affect planned investment spending and hence the equilibrium level of output, but this change in investment spending ________.
13. 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.
14. In the money market, a condition of excess supply of money can be eliminated by a ________ in aggregate output or a ________ in the interest rate, everything else held constant.
15. Aggregate output and the interest rate are ________ related to government spending and are________ related to taxes.
16. If American college students decide that drinking Mexican-brewed beer helps one get noticed, net exports will tend to fall, causing aggregate demand to ________ and the ________ curve to shift to the left, everything else held constant.
17. An autonomous appreciation of the U.S. dollar makes American goods ________ expensive relative to foreign goods which ________ net exports in the U.S.
18. In the ISLM framework, an expansionary monetary policy causes aggregate output to ________ and the interest rate to ________, everything else held constant.
19. A contractionary monetary policy shifts the LM curve to the ________, reducing ________, everything else held constant.
20. A shift in tastes toward American goods ________ net exports in the U.S. and causes the IS curve to shift to the ________ in the U.S., everything else held constant.
21. If the Fed adopts a policy of pegging the interest rate, a ________ in government spending forces the Fed to increase the money supply to prevent interest rates from ________.
22. If an economy experiences high interest rates and high unemployment, the ISLM framework predicts that ________ policy has been too ________.
23. A decline in the money ________ shifts the LM curve to the ________, causing the interest rate to rise and output to fall, everything else held constant.
24. In the ISLM framework a contractionary fiscal policy causes aggregate output to ________ and the interest rate to ________, everything else held constant.
25. The IS curve shifts to the left when ________.

⚡ Recently practiced quizzes in this topic
Live quiz activity
Objective GS (General Studies) in हिन्दी - Indian States & The Company Rajasthan GK Hindi - Fairs & Festivals Objective GS (General Studies) in हिन्दी - Indian Polity - Historical Background of Constitution Objective GS (General Studies) in हिन्दी - Indian Polity - Judiciary Rajasthan GK Hindi - Culture Objective GS in Hindi - General Geography - Air Pressure, Humidity & Air Movement Rajasthan GK Hindi - Energy Rajasthan GK Hindi - Tourism Rajasthan GK Hindi - Rajasthan Introduction Rajasthan GK Hindi - Rivers & Lakes
 
❤ 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.