Exam 9: Aggregate Demand

Keynes was concerned that at macroeconomic equilibrium in a laissez faire free market economy,full employment

Suppose the consumption function is C = $200 + 0.85Y_D.If disposable income is $400,consumption is

Keynes was concerned that at macroeconomic equilibrium the economy would experience

The marginal propensity to consume (MPC)is related to the marginal propensity to save (MPS)by the formula MPC = 1 - MPS.

Using Figure 9.9,and assuming the full-employment output level is $50 billion,

In Figure 9.5,a movement from Point A to Point C would result from

Suppose the MPC in an economy is 0.9.The APC is initially 0.95 and disposable income is $4 billion.If disposable income increases to $14 billion,what is the new level of consumption?

Which diagram in Figure 9.4 shows what happens to investment as the economy enters a recession,causing both business expectations to collapse and saving to increase further,thus causing banks to lower interest rates?

Which diagram in Figure 9.4 shows what happens to investment if the government decides to make housing cheaper by lowering interest rates? Which diagram in Figure 9.4 shows how investment responds to the expectation that the economy is about to go into a period of fast growth,causing firms to expect increased sales?