Exam 21: The Is Curve

Describe Keynes's equilibrium condition and what it implies.

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

If aggregated demand is less than actual output, unplanned inventory ________ will cause output to ________.

If unplanned investment is positive, firms will ________ production and output will ________.

Keynes mentioned two factors that influenced planned investment spending. They are ________.

A tax increase ________ disposable income, ________ consumption expenditure, and shifts the IS curve to the ________, everything else held constant.

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

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

Situation 20-1 Assume a closed economy with no government. Suppose that autonomous consumption equals $400, planned investment equals $500, and the mpc equals 0.9. -Using the information in Situation 20-1, if aggregate output is equal to $10000, then unplanned inventory investment equals ________.

An increase in autonomous consumer expenditure causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________, everything else held constant.

Everything else held constant, if total consumption increases from $600 to $800 because of an increase of disposable income of $400, then the mpc is equal to ________.

The Bank of Canada increases interest rates when they want to reduce aggregate demand to fight inflation. How do increases in the interest rate reduce aggregate demand?

What is the role of the government, according to Keynes, in stimulating the economy, raising aggregate output and reducing unemployment when the economy is in a recession?

Keynes believed that changes in autonomous spending were dominated by changes in ________.

A reduction 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.

A shift in tastes toward foreign goods ________ net exports in Canada and causes the IS curve to shift to the ________ in Canada everything else held constant.

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

Assume that autonomous consumption equals $200 and that the mpc equals 0.8. If disposable income equals $1000, then total consumption equals ________.

In the simple Keynesian model, equilibrium aggregate output is determined by ________.