The IS curve would unambiguously shift up if there were
A)an increase in both government purchases and corporate taxes.
B)an increase in both government purchases and the expected future marginal product of capital.
C)an increase in the expected future marginal product of capital and a decrease in expected future output.
D)a decrease in both corporate taxes and the expected future marginal product of capital.

Question

Quizplus · Accepted Answer

An increase in government purchases would shift the IS curve up. An increase in the expected future marginal product of capital would increase investment and shift the IS curve up as well. Therefore, option B is the correct answer as it includes both of these factors. Options A, C, and D include contradictory factors that would shift the IS curve in different directions.

The IS Curve Would Unambiguously Shift Up If There Were