1. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. Chapter 4 Monetary and Fiscal Policy in the IS-LM Model

2. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-2 Table 4-1 A Simplified Version of the Fed’s Balance Sheet (All Values in $ Billions)

3. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-3 Figure 4-1 The Demand for Money, the Interest Rate, and Real Income

4. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-4 Figure 4-2 Effect on the Money Demand Schedule of a Decline in Real Income from $8,000 to $6,000 Billion

5. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-5 Figure 4-3 Derivation of the LM Curve

6. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-6 Figure 4-4 The IS and LM Schedules Cross at Last

7. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-7 How Monetary Policy Actually Worked in 2001–04

8. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-8 Figure 4-5 The Effect of a $1,000 Billion Increase in the Money Supply With a Normal LM Curve

9. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-9 Figure 4-6 The Effect on Real Income and the Interest Rate of a $500 Billion Increase in Government Spending

10. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-10 Figure 4-7 The Effect of an Increase in the Money Supply With a Normal LM Curve and a Vertical LM Curve

11. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-11 Figure 4-8 Effect of the Same Increase in the Real Money Supply with a Zero Interest Responsiveness of Spending and with a High Interest Responsiveness of the Demand for Money

12. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-12 Figure 4-9 Effect of a Fiscal Stimulus when Money Demand Has an Infinite and a Zero Interest Responsiveness

13. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-13 Figure 4-10 The Effect on Real Income of a Fiscal Stimulus With Three Alternative Monetary Policies (1 of 2)

14. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-14 Figure 4-10 The Effect on Real Income of a Fiscal Stimulus With Three Alternative Monetary Policies (2 of 2)

15. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-15 Figure 4-10 The Effect on Real Income of a Fiscal Stimulus With Three Alternative Monetary Policies

16. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-16 International Perspective Monetary and Fiscal Policy Paralysis in Japan’s “Lost Decade”

17. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 4-17 International Perspective Monetary and Fiscal Policy Paralysis in Japan’s “Lost Decade”