During a banking crisis and credit crunch, the curve shifts leftward, resulting in a(n) in aggregate demand, production, and employment.
A)IS; increase
B)IS; decrease
C)LM; increase
D)LM; decrease

Question

Quizplus · Accepted Answer

During a banking crisis and credit crunch, there is a decrease in the money supply and an increase in interest rates, which leads to a leftward shift of the IS curve. This shift results in a decrease in aggregate demand, production, and employment.

During a Banking Crisis and Credit Crunch, the Curve Shifts