A decline in autonomous planned investment spending causes the equilibrium level of aggregate output to ________ and shifts the ________ curve to the ________, everything else held constant.
A) rise; MP; right
B) rise; IS; right
C) fall; IS; left
D) fall; MP; left

Question

Quizplus · Accepted Answer

A decline in autonomous planned investment spending causes a decrease in the aggregated demand in the economy. This leads to a decrease in the equilibrium level of aggregate output, hence the fall in the curve. The IS curve shifts to the left because the reduction in investment spending causes a decrease in the demand for goods and services.

A Decline in Autonomous Planned Investment Spending Causes the Equilibrium