91Ó°ÊÓ

What is the meaning of the \(45^{\circ}\) line in the \(45^{\circ}\) -line diagram?

Explain the difference between aggregate expenditure and aggregate demand.

What is the key idea in the aggregate expenditure macroeconomic model?

In the aggregate expenditure model, why is it important to know the factors that determine consumption spending, investment spending, government purchases, and net exports?

What are the five main determinants of consumption spending? Which of these is the most important? How would a rise in stock prices or housing prices affect consumption spending?

What is the multiplier effect? Use a \(45^{\circ}\) -line diagram to illustrate the multiplier effect of a decrease in government purchases

What are inventories? What usually happens to inventories at the beginning of a recession? At the beginning of an expansion?

Use a \(45^{\circ}\) -line diagram to illustrate macroeconomic equilibrium. Make sure your diagram shows the aggregate expenditure function and the level of equilibrium real GDP and that your axes are properly labeled.

Explain which components of aggregate expenditure are affected by a change in the price level.

Does a change in the price level cause a movement along the aggregate expenditure line or a shift of the aggregate expenditure line? Does a change in the price level cause a movement along the aggregate demand curve or a shift of the aggregate demand curve?