A reduction in personal saving would shift
A) the IS curve downward
B) both the IS curve and the aggregate demand curve outward
C) the LM curve inward
D) both the LM curve and the aggregate supply curve inward
E) the aggregate demand curve inward and the aggregate supply curve downward

Question

Quizplus · Accepted Answer

A reduction in personal saving decreases the amount of funds available for investment, leading to higher interest rates and stimulating investment spending. This increases aggregate demand, shifting the IS curve outward. The aggregate demand curve also shifts outward as a result of increased spending.

A Reduction in Personal Saving Would Shift