A positive demand shock causes a ________ the IS curve and a ________ the aggregate demand curve.
A) movement up along; shift to the right of
B) shift to the right of; movement down along
C) movement down along; movement down along
D) shift to the right of; shift to the right of

Question

Quizplus · Accepted Answer

A positive demand shock is an increase in aggregate demand. This would shift the IS curve to the right (since output increases for any given interest rate) and also shift the aggregate demand curve to the right (since higher output leads to higher demand for goods and services).

A Positive Demand Shock Causes a ________ the IS Curve