Exam 21: The Is Curve

In the Keynesian framework, as long as output is ________ the equilibrium level, unplanned inventory investment will remain negative and firms will continue to ________ production.

A decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift ________, the equilibrium level of aggregate output to fall, and the IS curve to shift to the ________, everything else held constant.

If Canadian university students decide that drinking Mexican-brewed beer helps one get noticed, net exports will tend to fall, causing aggregate demand to ________ and the ________ curve to shift to the left, everything else held constant.

Aggregate output is increased by a decrease in ________.

A depreciation of the Canadian dollar makes Canadian goods cheaper relative to foreign goods, resulting in a ________ in net exports in Canada and a ________ shift of the IS curve in Canada, everything else held constant.

Equilibrium output is reduced by an increase in ________.

In the Keynesian model of income determination, consumer expenditure includes spending by ________.

What is the marginal propensity to consume according to Keynes's consumption theory? provide an example.

An increase in government spending causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________, everything else held constant.

What types of investment exist according to Keynes's theory of the determination of aggregate output? what is a major difference between the two according to Keynes?

A difference between inventory investment and fixed investment is that ________.

Situation 20-2 Assume a closed economy. Suppose that autonomous consumption equals $400, planned investment equals $500, government expenditure equals $200, net taxes equals $50, and the mpc equals 0.9. -In a closed economy, aggregate demand is the sum of ________.

Keynes believed that unstable investment caused the Great Depression. Using the simple Keynesian model, explain how a fall in investment affects equilibrium output.

When the interest rate is ________, ________ investments in physical capital will earn more than the cost of borrowed funds, so planned investment spending is ________.

Keynes was especially concerned with explaining the ________.

Points on the IS curve satisfy ________ market equilibrium.

The marginal propensity to consume (mpc) can be defined as the fraction of ________.

When the level of unplanned inventory investment is equal to zero, the economy is ________.

Aggregate output is ________ related to autonomous consumer expenditure, and is ________ related to planned investment spending.

Everything else held constant, if aggregate output is to the ________ of the IS curve, then there is an excess demand of goods which will cause aggregate output to ________.