Suppose that net exports were to become more sensitive to changes in the interest rate. You would reflect this change by drawing
A) steeper LM curves.
B) flatter LM curves.
C) steeper IS curves.
D) flatter IS curves.
E) IS and LM curves exactly as before.

Question

Quizplus · Accepted Answer

If net exports become more sensitive to changes in the interest rate, the IS curve becomes flatter. This is because a change in the interest rate will have a larger effect on net exports, and thus on aggregate demand, causing a larger shift in the equilibrium output for a given change in the interest rate.

Suppose That Net Exports Were to Become More Sensitive to Changes