A Reasonable Dynamic Assumption for the IS-LM Model Is That

question 7

Multiple Choice

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

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

---

Definitions:

Assumptions

Fundamental beliefs or statements taken for granted in the planning and decision-making process.

Schedule

A detailed plan or listing, often used in accounting to organize financial information, activities, or obligations.

Effective Interest Method

A way of amortizing the cost of a bond premium or discount over its life, giving a constant rate of interest over the period.

Issued

Refers to the total number of shares that have been allocated by a company and are held by shareholders.