# 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)

4

1/10

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.

Inward

The MPC

Example: