IS-MP Analysis: Interest Rates and Output

Front

What are the components of Aggregate Expenditure (AE)?

Back

B. Consumption, Investment, Government Purchases, Net Exports

Front

What happens when output exceeds aggregate expenditure?

Back

C. Businesses cut production

Front

Which curve represents the relationship between real interest rates and output gap?

Back

C. IS curve

Front

What causes a movement along the IS curve?

Back

B. Changes in real interest rate

Front

Which of the following would likely shift the MP curve down?

Back

C. The Bank of Canada lowers the risk-free rate

Front

If the real interest rate rises, what typically happens to investment spending?

Back

B. It decreases

Front

A negative output gap occurs when:

Back

C. Actual output < potential output

Front

What policy causes a shift in the IS curve?

Back

B. Fiscal policy

Front

The MP curve reflects the real interest rate set by the Bank of Canada and financial markets.

Back

True

Front

A higher real interest rate leads to a lower level of aggregate expenditure.

Back

True