A decrease in autonomous consumer expenditure causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________,everything else held constant.
A)rise;LM;right
B)rise;IS;right
C)fall;IS;left
D)fall;LM;left

Question

Quizplus · Accepted Answer

A decrease in autonomous consumer expenditure represents a decrease in aggregate demand, resulting in a decrease in equilibrium output. The IS curve shifts to the left because at any given interest rate, there is now less planned expenditure in the economy. The LM curve is not affected by changes in autonomous expenditure, so options A and D can be eliminated. Option B is incorrect because a rise in equilibrium output occurs when there is an increase in autonomous expenditure rather than a decrease.

A Decrease in Autonomous Consumer Expenditure Causes the Equilibrium Level