A decrease in the price level causes a ________ the IS curve and a ________ the aggregate demand curve.
A) movement up along; movement up along
B) shift to the right of; movement up along
C) movement down along; movement down along
D) shift to the left of; movement down along

Question

Quizplus · Accepted Answer

A decrease in the price level shifts the aggregate demand curve to the right, leading to a movement down along the IS curve. The reason for this is that a lower price level encourages increased consumption, investment, and net exports, leading to a higher level of output and a lower interest rate (which is captured by the downward movement along the IS curve).

A Decrease in the Price Level Causes a ________ the IS