In the IS-LM model in a closed economy, an increase in government spending increases the interest rate and crowds out:
A)prices.
B)investment.
C)the money supply.
D)taxes.

Question

Quizplus · Accepted Answer

In the IS-LM model, an increase in government spending shifts the IS curve to the right, leading to higher interest rates. This increase in interest rates can crowd out private investment, as borrowing costs become more expensive.

In the IS-LM Model in a Closed Economy, an Increase