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Exam 20: The Is Curve

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Question 61

Multiple Choice

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Assume that autonomous consumption equals $200 and disposable income equals $1000.If total consumption equal $800,then the mpc equals

A) 0.2.
B) 0.6.
C) 0.8.
D) 1.0.

E) B) and D)
F) A) and C)

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Question 62

Multiple Choice

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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) below; lower
B) above; lower
C) below; raise
D) above; raise

E) None of the above
F) B) and C)

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Question 63

Multiple Choice

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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.

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

His analysis started with the recognition that the total quantity demanded of an economy's output was the sum of four types of spending: consumer expenditure,planned investment spending,government spending,and net exports.

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

A decrease in interest rates

In the Keynesian cross diagram,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.

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

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

The negative relation between investment spending and the interest rate is what gives the ________ curve its ________ slope.

If American college 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.

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.

If the consumption function is C = 20 + 0.8Y_D,then an increase in disposable income by $100 will result in an increase in consumer expenditure by

If aggregate demand equals output,

The Federal Reserve increases interest rates when it wants to reduce aggregate demand to fight inflation.How do increases in the interest rate reduce aggregate demand?

Factors that influenced planned investment spending include:

A rise in autonomous planned investment spending causes the equilibrium level of aggregate output to ________ and shifts the ________ curve to the ________,everything else held constant.

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

Planned investment spending,a component of aggregate demand,is equal to