The expenditure multiplier in the ISLM framework is smaller than that derived from the simple Keynesian model because

Question

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In the ISLM framework, the LM curve is assumed to have a positive slope due to the assumption that interest rates rise as output increases. This means that the effect of an increase in expenditure on output is partially offset by an increase in interest rates, leading to a smaller expenditure multiplier compared to the simple Keynesian model.

The Expenditure Multiplier in the ISLM Framework Is Smaller Than