True or False 1. In the IS-LM model of business cycle fluctuations, firms are assumed to meet demand.

True or False

1. In the IS-LM model of business cycle fluctuations, firms are assumed to meet demand.  

2. When the economy is outside its full-employment level of output, IS and LM together determine the equilibrium level of output in the macro economy.

3. Which of the following will cause the IS curve to shift RIGHT (OUTWARDS)? 

a) A fall in lump sum income taxes (T) - leads to greater spending (shifts out IS)

b) A fall in the price level - alters the real money supply (shifts LM)

c) A fall in Money Supply - alters the real money supply (shifts LM)

d) A fall in government expenditure - leads to lower spending (shifts in IS) 

4. Which of the following will cause the LM curve to shift RIGHT (OUTWARDS)?

 e) A fall in lump sum income taxes (T) - leads to greater spending (shifts IS)

f) A fall in the price level - increases the real money supply (shifts out LM)

g) A fall in Money Supply - decreases the real money supply (shifts in LM)

h) A fall in government expenditure - leads to lower spending (shifts IS)