In the IS-LM model the equilibrium level of GDP depends on:
A)the marginal propensity to consume.
B)public expenditure.
C)money supply.
D)all of the above.

Question

Quizplus · Accepted Answer

In the IS-LM model, the equilibrium level of GDP is determined by the intersection of the IS and LM curves. The IS curve represents equilibrium in the goods market, and is affected by the marginal propensity to consume and public expenditure. The LM curve represents equilibrium in the money market, and is affected by the money supply. Therefore, the equilibrium level of GDP depends on all of these factors: the marginal propensity to consume, public expenditure, and money supply.

In the IS-LM Model the Equilibrium Level of GDP Depends