Econ test 3

If the dollar appreciates relative to foreign currencies, we would expect:

A country's net exports to fall

The aggregate expenditures model is built upon which of the following assumptions

prices are fixed

Graphically demand-pull inflation is shown as a

rightward shift of the AD curve

The aggregate demand curve

shows the amount of real output that will be purchased at each possible price level.

The investment demand curve portrays an inverse (negative) relationship between

the real interest rate and investment.

If the consumption schedule shifts upward and the shift was not caused by a tax change, the saving schedule:

will shift downward

In a mixed open economy, the equilibrium GDP exists where

Ca+Ig+Xn+G=GDP

Other things equal a decrease in the real interest rate will

Expand investment and shift the AD curve to the right

The immediate-short-run aggregate supple curve is

Horizontal

The labels for the axes of an aggregate supply curve should be

Real domestic output for the horizontal axis and price level for the vertical axis

One of the most important views expressed by classical macroeconomics was that

Supply creates its own demand

The real-balances effect indicates that:

a higher price level will decrease the real value of many financial assets and therefore reduce spending.

An increase in investment and government spending can be expected to shift the

aggregate expenditures curve upward and the aggregate demand curve rightward.

For a private closed economy, an unintended decline in inventories suggests that

aggregate expenditures exceed production.

An inflationary expenditure gap is the amount by which

aggregate expenditures exceed the full-employment level of GDP.

The 45 degree line on a graph relating consumption and income shows

all the points at which consumption and income are equal.

Other things equal the slope of the aggregate expenditures schedule will increase as a result of

an increase in the MPC

Dissaving occurs where:

consumption exceeds income.

The consumption schedule directly relates

consumption to the level of disposable income.

A decline in disposable income:

decreases consumption by moving downward along a specific consumption schedule.

The level of aggregate expenditures in the private closed economy is determined by the:

expenditures of consumers and businesses.

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will

increase U.S. exports and decrease U.S. imports.

Investment and saving are, respectively:

injections and leakages

The most important determinant of consumer spending is

level of income

If the price level decreases, then the aggregate expenditures schedule will shift. This translates into a

movement down along the aggregate demand curve