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Exam 20: The Is Curve

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Question 1

Multiple Choice

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

A) up;left
B) up;right
C) down;left
D) down;right

E) B) and C)
F) B) and D)

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B

Question 2

Multiple Choice

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

A) negative;lower
B) negative;raise
C) positive;lower
D) positive;raise

E) A) and B)
F) A) and D)

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Question 3

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Aggregate demand in an economy with no government or foreign trade is

Use the following Situation to answer the question : 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

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 ________.

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

A decrease in autonomous planned investment spending,other things equal,shifts the ________ curve to the ________.

Keynes's motivation in developing the aggregate output determination model stemmed from his concern with explaining

In an open economy,aggregate demand is the sum of

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

An increase in autonomous consumer expenditure causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________,everything else held constant.

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

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 ________.

Under Keynesian analysis,aggregate demand can be written as

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.

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

In the Keynesian cross diagram,a decline in autonomous consumer expenditure 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.

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