IS / LM
Higher C, I, or G.
What are factors that shift the IS curve right?
Increases in C, I,or G.
What causes the AD curve to shift right?
What is right?
What is increase?
This causes increasing the money supply or lowering interest rates
What is expansionary monetary policy?
Higher money supply or lower money demand.
What shifts the LM curve right?
This causes P and Y to decrease.
What is a leftward shift in AD?
A tax cut causes this shifts
What is IS and AD shift right?
This happens to r and C/I when LM shifts right
What is r↓ C → and I↑?
This causes decreasing government spending or increasing taxes
What is contractionary fiscal policy?
r decreases due to this shift in the IS curve
What is an IS shift right?
Lower wages, positive productivity, or better technology cause this.
What is an AS shift to the right?
The central bank action to shift LM left and AD left
What is contractionary monetary policy?
This happens to Y and P when AS shifts right
What is Y↑, P↓?
IS shifts right → Y↑, r↑ due to this fiscal policy
What is expansionary fiscal policy?
This happens to LM if money demand increases
What is LM shifts left and Y decreases.
A negative supply shock does this
What is AS shifts left → P↑ and Y↓.
LM shifts left due to this change in money demand
What is an increase in money demand?
This happens to r and Y when IS shifts left
What is r↓, Y↓?
This monetary policy offsets an overheating economy
What is the central bank raises interest rates / reduces money supply?
LM shifts right due to this change in prices
What is a decrease in prices?
This causes Y to increase with an ambiguous effect on P
What is AD shifts right while AS shifts right.
IS shifts left due to this prediction of future profits
What is the effect of a decline in expected future profitability?
Y↓ and change to P ambiguous when these shifts occur
What is AS and AD shift left?
This is the challenge in fighting stagflation
What is fixing inflation requires AD↓ while fixing unemployment requires AD↑ or AS→?