A decrease in wealth would cause the IS curve to
A)shift up and to the right.
B)shift down and to the left.
C)remain unchanged.
D)shift up and to the right only if people face borrowing constraints.

Question

Quizplus · Accepted Answer

A decrease in wealth would lead to a decrease in consumption spending, which in turn would lead to a decrease in aggregate demand. This would result in a leftward shift of the IS curve.

A Decrease in Wealth Would Cause the IS Curve to