An increase in the price level causes a ________ the IS curve and a ________ the aggregate demand curve.
A) movement up along; movement down along
B) shift to the right of; movement down along
C) movement up along; movement up along
D) shift to the left of; movement up along

Question

Quizplus · Accepted Answer

An increase in the price level causes an upward movement along the IS curve (as it reduces real money balances, making people want to hold less money and spend more) and an upward movement along the aggregate demand curve (as it reduces the real value of debt, making people feel wealthier and want to spend more).

An Increase in the Price Level Causes a ________ the IS