In the 1990s in Japan
A) the IS curve shifted to the right.
B) the IS curve shifted to the left.
C) the LM curve shifted to the left.
D) the LM curve became more vertical.

Question

Quizplus · Accepted Answer

In the 1990s in Japan, the economy experienced a period of stagnation and deflation, leading to decreased investment and consumer spending. This would cause the IS curve, which represents the relationship between interest rates and the level of income that brings the goods market into equilibrium, to shift to the left. This shift indicates a decrease in the demand for goods at any given interest rate, consistent with the economic conditions of Japan during that time.