The IS curve would unambiguously shift up and to the right 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 both government purchases and the expected future marginal product of capital would shift the IS curve up and to the right. This is because an increase in government purchases would increase aggregate demand and the expected future marginal product of capital would increase investment, leading to higher output at every interest rate level.

The IS Curve Would Unambiguously Shift Up and to the Right