Exam 27: The IS Curve

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 contained in Situation 20-1,if planned investment decreases by $100,the equilibrium aggregate output will change by

A reduction 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 a closed economy,aggregate demand is the sum of

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

Everything else held constant,if consumption expenditure falls by 160 when disposable income falls by 200,the mpc is

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

A difference between inventory investment and fixed investment is that

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

Other things equal,a decrease in autonomous consumption shifts the ________ curve to the ________.

In an open economy,aggregate demand is the sum of

Points on the IS curve satisfy ________ market equilibrium.

Aggregate output is increased by a decrease in

The marginal propensity to consume (mpc)can be defined as the fraction of

Keynes was especially concerned with explaining the

Factors that influenced planned investment spending include

An increase in unplanned inventory investment for the entire economy equals the excess of

Keynes mentioned two factors that influenced planned investment spending

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 ________,the equilibrium level of aggregate output to fall,and the IS curve to shift to the ________,everything else held constant.

Keynes reasoned that consumer expenditure is most closely related to

Aggregate output is ________ related to autonomous consumer expenditure,and is ________ related to the level of taxes.