Refer to figure 3 below. Which statement about the two possible IS curves in figure 3 is true? Figure 3 A) The economy is in equilibrium where IS₁ and IS₂ intersect. B) IS₁ represents an economy in which consumers' expenditure and investment spending are more sensitive to interest rate changes than they are in the economy represented by IS₂. C) IS₁ represents an economy in which consumers' expenditure and investment spending are less sensitive to interest rate changes than they are in the economy represented by IS₂. D) None of the above is true.

Question

Quizplus · Accepted Answer

IS₁ is steeper than IS₂, indicating that in the economy represented by IS₁, consumers' expenditure and investment spending are more sensitive to interest rate changes than they are in the economy represented by IS₂.

Refer to Figure 3 Below