A decline in wealth that doesn't affect labour supply would shift the IS curve ________ and the FE line ________.
A)down;is unchanged
B)down;left
C)up;is unchanged
D)up;left

Question

Quizplus · Accepted Answer

A decline in wealth would lead to a decrease in consumption, leading to a decrease in aggregate demand and a downward shift in the IS curve. Labour supply is not affected, so the FE line remains unchanged.

A Decline in Wealth That Doesn't Affect Labour Supply Would