Exam 20: The Is Curve

In the Keynesian cross diagram,a decline in autonomous consumer expenditure 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.

When interest rates rise in the United States (with the price level fixed),the value of the dollar ________,domestic goods become ________ expensive,and net exports ________.

There are two types of investment: ________ investment-the spending by business firms on equipment and structures,and planned spending on residential houses-and ________ investment-spending by business firms on additional holdings of raw materials,parts,and finished goods.

A shift in tastes toward foreign goods ________ net exports in the U.S.and causes the quantity of aggregate output demanded to ________ in the U.S.,everything else held constant.

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.

Everything else held constant,a shift in tastes in the U.S.toward Mexican goods will ________ net exports in the U.S.and cause the quantity of aggregate output demanded to ________ in Mexico.

An increase in interest rates

Factors that influenced planned investment spending include:

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

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

Everything else held constant,if disposable income increases by 200 and consumption expenditure increases by 150,the mpc is

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

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

In the Keynesian cross diagram,an increase in autonomous consumer expenditure causes the aggregate demand function to shift up,the equilibrium level of aggregate output to ________,and the IS curve to shift to the ________,everything else held constant.

A tax cut initially

Under Keynesian analysis,aggregate demand can be written as

The ________ traces out the points for which total quantity of goods produced equals total quantity of goods demanded.

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

A decrease in unplanned inventory investment for the entire economy equals the excess of

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