1. What factor(s) determine the slope of the IS function?
2. Let's assume that the Fed will be raising interest rates this year in response to strong economic growth. If we were to find that firms continued to spend just about the same amount after as before the rise in rates, what could we conclude about the slope of the IS curve? Illustrate and explain.
3. What factor(s) will cause the IS function to shift to the right?
4. Assume that the dollar has fallen about 15% over the past year. A falling dollar makes imports more expensive and exports more competitive. How might that affect the position of the IS curve? Explain and illustrate.
5. George W. Bush convinced Congress in his first term to cut taxes. Illustrate this fiscal policy move via the IS curve.
6. What are the primary motives of the demand for money in the Theory of Liquidity Preference? Describe each motive and tell which economic factor is assumed to most influence the motive.