A temporary decline in government purchases would shift the IS curve ________ and the LM curve ________.
A)down;is unchanged
B)down;left
C)up;is unchanged
D)up;left

Question

Quizplus · Accepted Answer

A temporary decline in government purchases would shift the IS curve down because it would decrease planned spending and thus decrease equilibrium output. The LM curve would be unchanged because it represents the relationship between interest rates and income, which is not affected by government purchases.

A Temporary Decline in Government Purchases Would Shift the IS