In Macroland autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20. The vertical intercept of the aggregate expenditures model line is
A. 290.
B. 0.25.
C. 0.75.
D. 320.
Answer: A
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The IS curve slopes upward because
a. as income rises, savings rise and consumption falls, decreasing output. b. as interest rates rise, the money supply rises, increasing output. c. as interest rates rise, planned investment must fall, increasing output. d. as income increases, money demand rises, which increases interest rates.
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A) long-run aggregate supply is growing at a faster rate than aggregate demand. B) long-run aggregate supply is growing at a slower rate than aggregate demand. C) there is an excess of total planned expenditures. D) long-run aggregate supply is constant.
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