In the IS-LM Model,an Increase in Government Spending in the Goods

question 31

Multiple Choice

In the IS-LM model,an increase in government spending in the goods market has an impact on the money market because

• A)it increases the money supply.
• B)it increases income,which increases money demand.
• C)it decreases income,which decreases money demand.
• D)it increases interest rates,which decreases money demand.
• E)none of the above.

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Definitions:

High-Coupon Bonds

Bonds that offer a higher-than-average interest rate (coupon) compared to others in the market, reflecting potentially higher risk.

Low-Coupon Bonds

Low-Coupon Bonds are bonds that have a lower interest rate than the prevailing market interest rate, typically making them sell at a discount to their face value.

Yield To Maturity

The total return anticipated on a bond if the bond is held until the end of its lifetime.

Annual Coupon

Annual Coupon refers to the yearly interest payment made by a bond issuer to its bondholders, based on the bond's face value.