Exam 27: The IS Curve

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

When interest rates fall in the United States (with the price level fixed),the value of the dollar ________,domestic goods become ________ expensive,and net exports ________.

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

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

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

In the Keynesian cross diagram,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.

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

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

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

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.

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

If aggregate demand falls short of current output,business firms will ________ production to ________ inventories.

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

If unplanned investment is negative,firms will ________ production and output will ________.

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?

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

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.

Situation 20-1 Assume a closed economy with no government.Suppose that autonomous consumption equals $400,planned investment equals $500,and the mpc equals 0.9. -Using the information in Situation 20-1,the equilibrium level of aggregate output is

Under Keynesian analysis,aggregate demand can be written as