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Derivation of IS and LM Functions - B Com MCQ


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10 Questions MCQ Test - Derivation of IS and LM Functions

Derivation of IS and LM Functions for B Com 2024 is part of B Com preparation. The Derivation of IS and LM Functions questions and answers have been prepared according to the B Com exam syllabus.The Derivation of IS and LM Functions MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Derivation of IS and LM Functions below.
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Derivation of IS and LM Functions - Question 1
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The IS curve in the IS-LM model represents the equilibrium in which market?

Detailed Solution for Derivation of IS and LM Functions - Question 1
The IS curve represents the equilibrium in the goods market, where planned spending equals income.
Derivation of IS and LM Functions - Question 2
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What does the LM curve represent in the IS-LM model?

Detailed Solution for Derivation of IS and LM Functions - Question 2
The LM curve represents the equilibrium in the money market, where the demand for money equals its supply.
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Derivation of IS and LM Functions - Question 3
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Why is the IS curve negatively sloped?

Detailed Solution for Derivation of IS and LM Functions - Question 3
The IS curve is negatively sloped because a higher interest rate reduces investment spending, leading to lower aggregate demand and income.
Derivation of IS and LM Functions - Question 4
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What determines the slope of the LM curve?
Detailed Solution for Derivation of IS and LM Functions - Question 4
The slope of the LM curve is determined by the responsiveness of money demand to changes in the interest rate.
Derivation of IS and LM Functions - Question 5
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When the LM curve shifts to the right, what happens to the equilibrium interest rate and income?
Detailed Solution for Derivation of IS and LM Functions - Question 5
When the LM curve shifts to the right, the equilibrium interest rate decreases, and income increases.
Derivation of IS and LM Functions - Question 6
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In the IS-LM model, what happens when there is an excess demand for money?
Detailed Solution for Derivation of IS and LM Functions - Question 6
Excess demand for money leads to rising interest rates as people sell other assets to acquire more money.
Derivation of IS and LM Functions - Question 7
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Why is the LM curve positively sloped?
Detailed Solution for Derivation of IS and LM Functions - Question 7
The LM curve is positively sloped because an increase in interest rates increases money demand due to higher opportunity costs of holding non-interest-bearing money.
Derivation of IS and LM Functions - Question 8
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In the IS-LM model, what happens when the IS curve shifts to the right?
Detailed Solution for Derivation of IS and LM Functions - Question 8
When the IS curve shifts to the right, the equilibrium interest rate increases, and income increases.
Derivation of IS and LM Functions - Question 9
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What is the joint equilibrium in the IS-LM model?
Detailed Solution for Derivation of IS and LM Functions - Question 9
The joint equilibrium in the IS-LM model is when both the goods and money markets are in equilibrium simultaneously.
Derivation of IS and LM Functions - Question 10
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How do income and interest rates adjust towards equilibrium in the IS-LM model?
Detailed Solution for Derivation of IS and LM Functions - Question 10
In the IS-LM model, income rises, and interest rates fall as the system moves towards equilibrium, with adjustments in both goods and money markets.
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