A Reasonable Dynamic Assumption for the IS- LM Model Is

question 15

Multiple Choice

A reasonable dynamic assumption for the IS- LM model is that:

• A) the economy is always on the LM curve, but moves only slowly to the IS curve.
• B) the output market is quick to adjust, but the money market adjusts more slowly.
• C) the economy is always on both the IS and LM curves.
• D) adjustment to the new IS- LM equilibrium is instantaneous after an LM shift, but not after an IS shift.
• E) the economy is always on the IS curve, but moves only slowly to the LM curve.

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