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