A decrease in the expected future interest rate will cause:
A) a rightward shift of the IS curve.
B) an upward shift of the LM curve.
C) the LM curve to become steeper.
D) a downward shift of the LM curve.
E) the IS curve to become flatter.

Question

Quizplus · Accepted Answer

A decrease in the expected future interest rate reduces the cost of borrowing, which can increase investment and consumption, leading to a rightward shift of the IS curve.

A Decrease in the Expected Future Interest Rate Will Cause