Using the IS curve
,in the long run,a¯ __________ and __________,so that
__________.
A)equals one; ;equals zero
B)is greater than one; ;is greater than zero
C)equals zero; ;equals zero
D)equals one; ;equals zero
E)equals one; ;equals one

Question

Using the IS curve 
,in the long run,a¯ __________ and __________,so that 
__________.
A)equals one; ;equals zero 
B)is greater than one; ;is greater than zero 
C)equals zero; ;equals zero 
D)equals one; ;equals zero 
E)equals one; ;equals one

Quizplus · Accepted Answer

In the long run, the IS curve is vertical, which means that output does not depend on the interest rate. Thus, a is equal to zero, and investment does not depend on the interest rate, so b is also equal to zero. This makes the equation of the IS curve Y = C + I (at full employment level) a horizontal line at the level of aggregate demand.

Using the IS Curve