In the IS-LM model, what does the IS curve represent?

The relationship between real money supply and interest rates.

The relationship between consumption and income.

The relationship between investment and interest rates.

The relationship between government expenditure and taxes.

In the IS-LM model, what is the primary role of the LM curve?

To show the relationship between investment and interest rates.

To show the relationship between consumption and income.

To show the relationship between money demand and money supply.

To show the relationship between government expenditure and taxes.

What is an autonomous change in investment spending?

A change in investment spending that depends on the interest rate.

A change in investment spending that is unrelated to the interest rate.

A change in investment spending caused by changes in consumption.

A change in investment spending caused by changes in government expenditure.

What factor can cause a shift in the LM curve in the IS-LM model?

Changes in government expenditure.

What determines the steepness of the IS curve?

The size of the multiplier and government spending.

The elasticity of the investment demand curve and the size of the multiplier.

Only the size of the multiplier.

Only the elasticity of the investment demand curve.

In the IS-LM model, what does the equilibrium point on the IS curve represent?

The point where aggregate supply equals aggregate demand.

The point where investment equals consumption.

The point where net exports equal government expenditure.

The point where real money supply equals real money demand.

Why is fiscal policy effective when the economy is in a liquidity trap?

Because it reduces the money supply, leading to higher interest rates.

Because it increases the money supply, leading to lower interest rates.

Because it increases investment demand, even when interest rates are at zero.

Because it decreases investment demand, even when interest rates are at zero.

What determines the position of the IS curve in the IS-LM model?

The level of autonomous expenditure.

The level of real money supply.

What happens to the IS curve when there is an autonomous increase in net exports?

The IS curve shifts to the left.

The IS curve shifts to the right.

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