In an open economy,an increase in foreign output would cause the IS curve to shift ________ and a decrease in the foreign real interest rate would cause the IS curve to shift ________.
A)down; down
B)down; up
C)up; down
D)up; up

Question

Quizplus · Accepted Answer

- An increase in foreign output would cause a shift of the IS curve to the right (up) because it would increase the demand for domestic products and cause an increase in the interest rate.
- A decrease in the foreign real interest rate would cause a shift of the IS curve to the right (down) because it would lower the cost of borrowing and increase investment, which would lead to an increase in output and income.

In an Open Economy,an Increase in Foreign Output Would Cause