Aggregate Demand

Question 1

IS Curve

Answer 1

Y = C (Y – T) + I (r) + G

Question 2

LM represent the money demand –

Answer 2

M/P = L (r, Y)

Question 3

Y increases there will higher demand
for money which will shift the curve

Answer 3

to the right

Question 4

We assume here that i = r since inflation is 0 since

Answer 4

prices are sticky

Question 5

When there is change in G or T this will shift the ____ curve as consumption and
government spending will change

Answer 5

IS

Question 6

When there is a change in M this will shift the ___curve as there is a shift in
the money supply

Answer 6

LM

Question 7

If G increases, then will shift the ___ to the right by 1/1-MPC ∆G causing the
output and income to ___

Answer 7

IS, rise

Question 8

If there is a tax cut – so consumer save _____ of the tax cut – this means the -
MPC/1-MPC ∆T will be the change in ___ – this change however will be smaller than
the change in __

Answer 8

1 - MPC, IS, G

Question 9

If money supply is increased this will shift the ___ curve to the right as this will lower
the ___ . so to balance it money demand will ___

Answer 9

LM, r, increase