Suppose there is an increase in expected future output. This will cause which of the following to occur?
A) The IS curve to shift left in the current period.
B) The IS curve to shift right in the current period.
C) The LM curve to shift up in the current period.
D) The LM curve to shift down in the current period.
E) Both the IS and LM curves to shift right in the current period.

Question

Quizplus · Accepted Answer

An increase in expected future output leads to an increase in expected future income, which causes an increase in current consumption and investment demand. This shift in demand leads to an increase in the equilibrium level of output, which is represented by a rightward shift in the IS curve.

Suppose There Is an Increase in Expected Future Output