Exam 27: The IS Curve

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 increases their spending by $50 and increases net taxes by 50,then equilibrium aggregate output will change by

If aggregate demand equals output,

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

An increase in interest rates

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 ________.

When the interest rate is ________,________ investments in physical capital will earn more than the cost of borrowed funds,so planned investment spending is ________.

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

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

Assume that disposable income equals $1000 and the mpc equals 0.6.If total consumption equal $800,then autonomous consumption is equal to

If net exports decrease by 250 and the mpc is 0.75,equilibrium aggregate output

If net exports increase by 100 and the mpc is 0.75,equilibrium aggregate output increases by

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

Everything else held constant,if consumption expenditure increases by 65 for a 100 increase in disposable income,the mpc is

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

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

An autonomous appreciation of the U.S.dollar makes American goods ________ expensive relative to foreign goods which ________ net exports in the U.S.

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.

A shift in tastes toward foreign goods ________ net exports in the U.S.and causes the IS curve to shift to the ________ in the U.S. ,everything else held constant.

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

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