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Questions › JNU › JNU SSS 2015 › Q42
2 marks, −0.5Macroeconomics › IS-LM model › Policy mix and relative effectivenessModerateabout 2 min

JNU SSS 2015 Question 42: IS-LM model

In the fixed price IS-LM model, which of the following is true if we compare the effects of an increase in government expenditure (X)(X)(X) with that of a reduction in money supply (Y)(Y)(Y)?

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In the fixed price IS-LM model, which of the following is true if we compare the effects of an increase in government expenditure (X) with that of a reduction in money supply (Y)? (A) Both will result in an increase in output but while X will be accompanied by a rise in the interest rate Y will reduce the interest rate (B) X and Y will have opposite effects on output but the same effect on the interest rate (C) X and Y will have the same effect on output but opposite effects on the interest rate (D) X will have an adverse effect on output because it will raise the level of the fiscal deficit while Y will result in an increase in output by reducing the interest rate

IS-LM model has come up 137 times in 7 exams since 2004.

What this question tests

This question is on Policy mix and relative effectiveness, part of IS-LM model in Macroeconomics.

Comparing fiscal and monetary policy and combining them to hit income and interest targets.

TestStop has 16 past-paper questions on this subtopic; the nearest in year are below.

  • IIT JAM 2022 · Q24Which of the following statements is NOT correct under the IS-LM (Fixed Price) model?
Practise IS-LM modelMore on Policy mix and relative effectiveness

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Question from the JNU SSS 2015 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.