A change in the multiplier (k)will change the
A)slope of the IS curve.
B)slope and the position of the IS curve.
C)slope of the LM curve.
D)position of the LM curve.

Question

Quizplus · Accepted Answer

A change in the multiplier will change both the slope and the position of the IS curve. The IS curve represents all the possible combinations of interest rates and levels of output where planned investment equals saving. A change in the multiplier will affect planned investment and therefore shift the IS curve. Additionally, the multiplier is calculated as the reciprocal of the marginal propensity to save, which is one of the determinants of the slope of the IS curve. Therefore, a change in the multiplier will also affect the slope of the IS curve.

A Change in the Multiplier (K)will Change the