Exam 21: The Is Curve

Aggregate demand in an economy with no government or foreign trade is ________.

Everything else held constant, changes in the interest rate affect planned investment spending and hence the equilibrium level of output, but this change in investment spending ________.

Keynes reasoned that consumer expenditure is most closely related to ________.

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

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 government spending increases by $100, then the equilibrium aggregate output will change by ________.

In the Keynesian cross diagram, a decline in autonomous consumer expenditure causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________, everything else held constant.

In an open economy, aggregate demand is the sum of ________.

An increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________, everything else held constant.

A decrease in autonomous planned investment spending, other things equal, shifts the ________ curve to the ________.

If the consumption function is expressed as C = a + mpc × YD, then "a" represents ________.

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

In a closed economy, aggregate demand is the sum of ________.

Describe how the economy heads towards equilibrium and why it has a tendency to settle there.

The IS curve shifts to the left when ________.

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

Keynes was especially interested in explaining movements of ________ because he wanted to explain why the Great Depression had occurred and how government policy could be used to increase ________ in a similar economic situation.

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

Keynes's motivation in developing the aggregate output determination model stemmed from his concern with explaining ________.

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 ________.