Chapter Questions
Keynes believed that _____________ was the critical determinant of the overall level of economic activity.
In the simple Keynesian model, we assume that the price level is _____________ as output changes.
_____________ spending is the largest component of the demand for final goods and services.
The _____________ factors affecting consumption are those that do not depend on income.
A(n) _____________ in real wealth would decrease autonomous consumption.
A higher interest rate today tends to make items purchased on credit _____________ expensive and _____________ expenditures on those items.
Either lower interest rates or lower household debt would tend to _____________ autonomous consumption.
An increase in consumer confidence would tend to _____________ consumption spending.
Personal consumption spending depends most importantly on your current _____________.
Your marginal propensity to consume is equal to the change in _____________ divided by the change in _____________.
The more you spend out of any given increase in income, the _____________ your marginal propensity to consume.
Your marginal propensity to save is equal to the change in _____________ divided by the change in _____________.
The MPC and MPS must add up to _____________.
The MPC is equal to the _____________ of the consumption function.
Consumption spending is partly _____________, or independent of income, and partly _____________, or dependent on income.
Income and _____________ are always the same in the economy.
Aggregate _____________ equal _____________ when the economy is in equilibrium.
In the Keynesian model, if output were lower than its equilibrium level, inventories would _____________desired levels and producers would _____________ output.
When inventories rise above desired levels, output will _____________.
When aggregate expenditures exceed output, output will _____________.
In addition to consumption, the major components of aggregate expenditures are _____________, _____________, and _____________.
Only in equilibrium do aggregate expenditures _____________ output.
One reason that investment contributes to the business cycle is that _____________ investment respondsdramatically to perceptions about future changes in business activity.
When unplanned inventory investment is _____________, output will tend to fall.
In equilibrium, unplanned business investment _____________ zero.
An increase in autonomous government purchases by $2 billion will increase output by _____________ $2 billion in the simple Keynesian model.
The expenditure multiplier is equal to 1 divided by _____________, when consumption is the only component of aggregate expenditures.
When autonomous investment increases, the level of consumption will _____________ as a result.
The _____________ is MPC, the smaller is the expenditure multiplier.
To go from the aggregate expenditure model to aggregate demand, we need to add how the _____________ affects each of the aggregate expenditure components.
Consumption, investment, and net exports all increase as a result of a _____________ in the price level.
In terms of the aggregate expenditure model, a fall in the price level shifts the aggregate expenditures curve _____________.
Changes in any of the components of aggregate expenditures for any reason other than a change in the_____________ or _____________ will also shift the aggregate demand curve.
When the aggregate expenditure curve shifts up for reasons other than changes in the price level, the aggregate demand curve shifts _____________.
The aggregate supply curve must be _____________ in the long run.
If the short-run aggregate supply curve slopes upward, an increase in aggregate demand will increase realoutput _____________ than aggregate expenditures in the short run.
The aggregate expenditure model could not explain the _____________ of the 1970s.