The lectures and the textbook addressed some basic aspects of how the link between the monetary environment and the overall macroeconomic developments is modeled. The questions below concern this topic.

In the IS-LM model of the economy, the link between interest rates and equilibrium GDP depicted by the IS curve is ______________ and the link between interest rates and equilibrium GDP depicted by the LM curve is ______________.

a. positive; positive

b. positive; negative

c. negative; positive

d. negative; negative

In the IS-LM model of the economy, fiscal policy affects (shifts) the ______________, while monetary policy affects (shifts) the _______________.

a. IS curve; IS curve

b. IS curve; LM curve

c. LM curve; IS curve

d. LM curve; LM curve

One of the disadvantages of the structural models of the economy is that they do not allow for a detailed estimate of the potential effects of various policy actions.

True

False