Exam 27: The IS Curve

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

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

Economists define investment as the purchase of

Keynes believed that changes in autonomous spending were dominated by changes in

A decrease in unplanned inventory investment for the entire economy equals the excess of

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

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.

If aggregate demand is less than the level of aggregate output,then ________ inventory investment will be ________.

Everything else held constant,changes in the interest rate affect planned investment spending and hence the equilibrium level of output,but this change in investment spending

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

The Keynesian framework indicates that government can play an important role in determining aggregate output by

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

If the interest rate falls,other things being equal,investment spending will

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,if aggregate output is equal to $10,000,then unplanned inventory investment equals

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.

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 autonomous consumption increases by $100,then equilibrium aggregate output will change by

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

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 taxes increase by $10,then the equilibrium aggregate output will change by

A decrease in interest rates

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 spending increases by $100,then the equilibrium aggregate output will change by