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Cards In This Set
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What is Say's Law?
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Supply creates demand
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What is autonomous consumption?
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The amount of money a household will spend completely independent of their disposable income. (necessities)
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Consumption function is comparing...
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... price levels and consumer expenditures
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Above the break even disposable income for the consumption function what occurs?
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Saving
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What would produce an upward shift the in consumption function?
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An increase in consumer wealth
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The investment demand curve is a relationship between which two components?
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Business spending for investment goods and saving
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What would produce a leftward shift in the investment demand curve?
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An increase in business taxes
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What does the aggregate expenditures function represent?
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The consumption function, the investment demand curve, and the autonomous consumption
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When will there be unplanned inventory investment accumulation?
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When aggregate output exceeds aggregate expeditures
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The multiplier effect can correct the economy. An increase in equilibrium output is created by:
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An increase in investment and an increase in spending
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What is the spending multiplier?
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1 / (1-MPC)
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If the value of the MPC is .5 what is the value of the spending multiplier?
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2
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If the MPC is .8 what is the spending multiplier?
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5
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If MPC is .75 a 50 billion dollar decrease in government spending would cause equilibrium output to:
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Decrease by 200 million
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If the MPC is .9, a 100 billion dollar increase in planned investment expenditure, other things being equal, will cause an increase in equilibrium output of:
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1,000 billion
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