Econ Final1. BeneficialSupplyShockShifts FE line Right because more output canbe produced for the same amount of capitaland labor2. Efficiency ofPaymentShifts LM Left. People can operate with lessmoney3. Increase inCapitalStockShifts FE line Right because more output canbe produced with the same amount of labor.May also increase MPN which increases labordemand and equilibrium employment4. Increase inEffective TaxRate onCapitalDesired Investment falls lowering the realinterest rate that clears the goods market5. Increase inExpectedFutureOutput YeShifts IS Up and to the Right. Desired savingfalls, Desired consumption rises raising realinterest rate where the good market clears6. Increase inExpectedInflationShifts LM Down and to the right Demand formoney falls lowering the real interest rate thatclears the asset market7. Increase inExpectedinflationShifts LM Left Higher expected inflationmeans a lower real return on money and thusa switch away from money8. Increase inGUp and to the Right. Decrease in DesiredSaving, increase in desired consumption,Raising real interest rate that clears goodsmarket9. Increase InLaborSupplyShifts FE line Right equilibrium employmentrises, raising full employment output10. Increase inNominalInterest rateon MoneyShifts the LM Curve up and to the left Demandfor money increases raising real interest ratethat clears the asset market11. Increase inPrice LevelShifts LM Right. Increase in price levelincreases need for money for transactions12. Increase inReal IncomeShifts LM Right, Higher real income impliesmore transactions13. Increase inReal InterestRateShifts LM Curve Left Higher real interest ratemeans higher return on alternative assets andthus a switch away from money14. Increase inTaxesShifts IS Down and to the Left Reduce desiredconsumption increasing desired savings andlowering real interest rate that clears goodsmarket15. Increase inTaxes(RicardianEquivalence)No Change16. Increase inWealthShifts IS Up and to the Right, Desired Savingfalls increasing Desired consuption, raisingreal interest rate that clears the goods market17. IncreaseMPKfShifts IS Up and to the Right Desiredinvestment increases, Raising the realinterest rate that clears the goods market18. IncreaseNominalInterest Rateon MoneyShifts LM Right, higher return on moneymakes people more willing to hold money19. IncreaseNominalMoneySupplyShifts LM Down and to the right Real moneysupply increase, loweing the real interest thatclears the asset market20. IncreasePrice Level PShifts LM Up and do the left Real moneysupply falls raising the real interest rate thatclears the Asset market21. IncreaseWealthShifts LM Right part of higher wealth may beheld in the form of money22. Liquidity ofAlternativeAssetsShifts LM Left. Makes money less attractiveand other assets more attractiveEcon FinalStudy online at