Which of the following would NOT cause a shift in the IS curve?
A) an increase in the domestic real interest rate
B) an increase in consumer confidence
C) a decrease in the expected future profitability of capital
D) a decrease in government purchases

Question

Quizplus · Accepted Answer

The IS curve represents the relationship between the interest rate and the level of income that brings the goods market into equilibrium. An increase in the domestic real interest rate does not shift the IS curve itself but moves along it, as it affects the equilibrium level of income by changing investment and consumption decisions. Changes in consumer confidence, expected future profitability of capital, and government purchases directly affect the demand for goods and services, thus shifting the IS curve.

Which of the Following Would NOT Cause a Shift in the IS