Exam 21: The Is Curve

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.

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

A tax cut initially ________.

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

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

The ________ describes points for which the goods market is in equilibrium.

A fall in inventories is synonymous with ________ investment.

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

Everything else held constant, a shift in tastes in Canada towards Canadian goods will ________ net exports in Canada and cause the quantity of aggregate output demanded to ________ in Mexico.

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.

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.

If actual output is greater than equilibrium output, firms will ________ output to keep from ________ inventories.

Which of the following does not shift the IS curve?

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

Factors that influenced planned investment spending include ________.

Aggregate output is ________ related to autonomous consumer expenditure, and is ________ related to the level of taxes.

Keynes was especially concerned with explaining the ________ level of output and employment during the ________.

An increase in investment spending because companies become more optimistic about investment profitability 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.

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

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. -Using the information in Situation 20-2, if taxes increase by $10, then the equilibrium aggregate output will change by ________.