An increase in the expected profitability of investment will cause
A)IS to shift upward.
B)IS to shift downward.
C)LM to shift upward.
D)LM to shift downward.

Question

Quizplus · Accepted Answer

An increase in expected profitability of investment means that there will be more investment, which will increase aggregate demand. As a result, the demand for goods and services will increase, leading to an increase in output and income. This will cause the IS curve to shift upward.

An Increase in the Expected Profitability of Investment Will Cause