Exam 10: Aggregate Demand I

Two interpretations of the IS-LM model are that the model explains:

In the liquidity preference model,what adjusts to move the money market to equilibrium following a change in the money supply?

In the Keynesian-cross model,a decrease in the interest rate ______ planned investment spending and ______ the equilibrium level of income.

In the Keynesian-cross model,if taxes are reduced by 250,then the equilibrium level of income:

An explanation for the slope of the IS curve is that as the interest rate increases,the quantity of investment ______,and this shifts the expenditure function ______,thereby decreasing income.

With planned expenditure and the equilibrium condition Y = PE drawn on a graph with income along the horizontal axis,if income exceeds expenditure,then income is to the ______ of equilibrium income and there is unplanned inventory ______.

Tax cuts stimulate ______ by improving worker's incentive and expand ______ by raising households' disposable income.

The IS and LM curves together generally determine:

Consider the impact of an increase in thriftiness in the Keynesian-cross analysis.Assume that the marginal propensity to consume is unchanged,but the intercept of the consumption function is made smaller so that at every income level saving is greater.This will:

In the Keynesian-cross model,what adjusts to move the economy to equilibrium following a change in exogenous planned spending?

The IS curve shows combinations of ______ that are consistent with equilibrium in the market for goods and services:

If neither investment nor consumption depends on the interest rate,then the IS curve is ______ and ______ policy has no effect on output.

When firms experience unplanned inventory accumulation,they typically:

According to the theory of liquidity preference,velocity is:

Use the following to answer questions : Exhibit: Keynesian Cross and Loanable Funds -(Exhibit: Keynesian Cross and Loanable Funds)Both graphs illustrate the inverse relationship between the equilibrium interest rate and the equilibrium level of income.The economy moves from equilibrium A to equilibrium B in the Keynesian-cross diagram as a result of a(n)______ that shifts planned expenditures.

If the demand function for money is M/P = 0.5Y - 100r,then the slope of the LM curve is:

The simple investment function shows that investment ______ as ______ increases.

In the Keynesian-cross model,if the MPC equals .75,then a $1 billion increase in government spending increases planned expenditures by ______ and increases the equilibrium level of income by ______.

The slope of the IS curve depends on:

In the IS-LM model,which two variables are influenced by the interest rate?