1.Use the IS-LM model to trace carefully the effects of

a. An increase in the money supply

b. An increase tn liquidity preference

c. An increase in the marginal rate of income taxation

d. An increase in defense spending

2. What h the effect on the slope of the IS curve of ?

a. An increase in the marginal propensity to consume

b. An increase in tho interest sensitivity of investment spending

c. An increase in tho progressivity of the income tax

3. Describe the factors that determine the slope (steepness) of the LM curve. What are the policy implications of a flattening of the LM curve?

4. Use the IS- LM model to analyze the proposition that recovery will befostered if interest rates are reduced by bringing the budget under "control"

5. use the IS -LM model to analyze the Reaganomics proposition discussed in Chapter I that tax cuts will generate more saving and Investment.