In the IS-LM model, a decrease in output would be the result of a(n):
A) decrease in taxes.
B) increase in the money supply.
C) increase in money demand.
D) increase in government purchases.

Question

Quizplus · Accepted Answer

In the IS-LM model, a decrease in output is caused by an increase in money demand. When there is an increase in money demand, interest rates rise, causing a decrease in investment and consumption spending, which in turn leads to a decrease in output.

In the IS-LM Model, a Decrease in Output Would Be