Macroeconomics: Aggregate Demand and Equilibrium

What is the most critical assumption underlying the Keynesian perspective on the effectiveness of monetary policy within a liquidity trap scenario?

In the context of the IS-LM model, what is the implication of the central bank targeting the money supply rather than interest rates?

What condition in the money market ensures monetary policy will be effective in stimulating the economy, rather than being rendered impotent by a liquidity trap?

How does an increase in the marginal tax rate (MTR) affect the IS curve and the effectiveness of fiscal policy?

Assuming government expenditure is exogenous, how does a decrease in autonomous consumption influence the aggregate demand (AD) curve and overall economic equilibrium in the IS-LM framework?

What effect does the crowding out effect have on the efficacy of fiscal policy, and under what conditions would fiscal policy be completely ineffective?

How do differing views on the sensitivity of money demand to interest rates impact the perceived effectiveness of monetary policy, comparing Keynesian and Classical/Monetarist perspectives?

Considering the characteristics of the IS curve, which scenario would cause it to be nearly vertical according to Keynesian economics?

What crucial element must be present for the multiplier effect to operate at its fullest potential, and how is the multiplier affected by this element?

In what way does autonomous investment affect the IS curve, and how does this affect the equilibrium level of output and interest rates?

What is the primary implication of the IS-LM model assuming a fixed price level, and how does this limitation affect its applicability in analyzing certain economic phenomena?

How does the introduction of an open economy influence the effectiveness of fiscal policy, specifically in terms of the impact on the IS curve and overall aggregate demand?

How does the slope of the LM curve influence the effect of fiscal policy on output, and what economic factors determine this slope?

What differentiates the monetary policy stance of an economy operating on the horizontal portion of the LM curve, according to Keynesian theory?

How does the IS-LM model's assumption that the central bank directly targets the money supply impact the behavior of interest rates and output when there are fluctuations in money demand?

Within the IS-LM framework, what is the most likely outcome of an expansionary fiscal policy financed by borrowing, with its corresponding impact on consumption and investment?

Considering an economy initially operating at equilibrium, how does an exogenous decrease in autonomous consumption affect the slope and position of the aggregate demand (AD) curve?

What is the fundamental implication of the slope of the IS curve for the relative effectiveness of fiscal versus monetary policy in influencing aggregate demand?

How would an increase in both autonomous government expenditure and taxes, with a balanced budget maintained, affect the IS curve, and what would be the resulting change in output and interest rates?

Within the IS-LM model, how does the implementation of expansionary monetary policy affect investment demand, and what implications do these effects have for aggregate consumption?

How does an increase in the general price level impact real money balances, and what effect does this have on the LM curve?

Assuming that an economy is operating at equilibrium, what would be the most likely outcome of an increase in both government expenditure and the money supply?

Under what conditions is fiscal policy considered completely ineffective according to monetarist theory, and how does this relate to the concept of crowding out?

In an open economy, how does the presence of international trade (exports and imports) modify the effectiveness of the domestic fiscal multiplier?

When is it optimal for governments to prioritize fiscal stabilization over allowing output to fluctuate freely, focusing on the differing views of Keynesian and some Classical economists?

In the IS-LM model, what is the effect of a decrease in the money supply on the interest rate in financial markets and its related effect on the LM curve?

How do differing assumptions about wage and price flexibility influence the effectiveness and implications of stabilization policies, particularly between Keynesian and Classical economic viewpoints?

How does the relative sensitivity of money demand to income and interest rates impact the slope of the LM curve, and what is the implication for the crowding out effect of fiscal policy?

According to Lucas Roberts, what would be the implication for welfare costs from economic fluctuations, and how would that compare to welfare costs of stabilization policies?

What distinguishes the Keynesian view from the Classical/Monetarist view on the role of government intervention in stabilizing the economy?

How does an economy's position relative to the LL curve influence the effectiveness of monetary or fiscal policies?

What factors would differentiate the shapes of the LM curve, contrasting the perspectives of Classical/monetarist and Keynesian?

If autonomous government expenditure (Go) increases, how would it affect expenditure or spending?

How is Money Demand negatively related to interest rates?

What does it mean when < $C_y (1 - T_y) < 1 $?