Chapter 10 Aggregate Expenditure y Aggregate Demand

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The aggregate expenditure line shows total planned spending at each

Income level, holding the price level constant

____ is illustrated by The distance between the aggregate expenditure line and the 45 degree line At each level of real GDP

Unplanned inventory changes

If planned spending exceeds planned output the result is

Unintended inventory reductions

The economy will expand if

Injections exceed leakages

On the aggregate expenditure graph, if and autonomous investment decreases by 10 billion

The aggregate expenditure line shifts downward by 10 billion

On the aggregate expenditure graph, if and autonomous investment increases by 20 billion

The aggregate expenditure line shifts upward by 20 billion

On the aggregate expenditure graph, if and autonomous saving increases by 15 billion

The aggregate expenditure line shifts downward by 15 billion

The simple multiplier

Is defined as 1.0 divided by the MPS(marginal propensity to save)

If the MPS is 0.25 then the simple multiplier is

4

If the simple multiplier is 10 then the MPS is

1/10

It is ____ that if there are no unintended changes In inventory, the economy is at Equilibrium level of real GDP demanded

This is true

Consumption plus saving equals

Disposable income at every level of real GDP Demanded

Aggregate Expenditure means

Total or combined spending

Movement along the aggregate expenditure curve is caused by

A change in the level of income

The aggregate expenditure line shows

Real GDP on the horizontal axis and Aggregate Expenditure on the vertical axis

If leakages exceed injections this will cause the economy to

Contract or shrink

In the simple aggregate expenditure model,

planned investment is Autonomous

The aggregate demand curve illustrates a relationship between

The price level and real GDP

When speaking of aggregate expenditures and increase in price level will

Shift the aggregate expenditure line downward; the economy moves upward along the aggregate demand curve.

An increase in the U.S. Price level, other things constant would

Decrease U.S. Exports and increase U.S. Imports. ( we would bring stuff in b/c it's cheaper)

As the U.S. price levels rise in relation to the price levels of other countries, in the U.S.

Consumption and net exports would decline.

A decrease in the U.S. Price level would result in

An increase in the level of aggregate quantity demanded.

A decline in the U.S. Price level would

Stimulate U.S. Exports but discourage imports causing a rightward movement along a given aggregate demand curve.

An increase in planned investment would

Cause a rightward shift in the aggreagate demand curve

If the level of autonomous spending increases at a given price level

The aggregate expenditure line shifts upward; the aggregate demand curve shifts right.

A decrease in planned investment will shift the aggregate demand curve

Inward

The slope of the aggregate expenditure line equals

The MPC

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