The IS curve will shift down and to the left when
A)desired saving declines.
B)government purchases increase.
C)consumption increases.
D)the expected future marginal product of capital declines.

Question

Quizplus · Accepted Answer

The IS curve represents the relationship between the interest rate and the level of income that brings the goods market into equilibrium. A decline in the expected future marginal product of capital would lead to a decrease in investment, as firms anticipate lower returns from new capital. This decrease in investment would reduce aggregate demand, shifting the IS curve to the left.

The IS Curve Will Shift Down and to the Left