A decrease in government spending causes the _____ curve to shift to the
A) LM, right.
B) LM, left.
C) IS, right.
D) IS, left.

Question

Quizplus · Accepted Answer

A decrease in government spending directly affects the goods market, leading to a decrease in aggregate demand. This is represented by a leftward shift in the IS curve, which shows the relationship between interest rates and the level of income that brings the goods market into equilibrium.

A Decrease in Government Spending Causes the _____ Curve to Shift