During 2002 and 2003, the US economy
A) experienced a shifting of the IS curve to the right because of increased business optimism and tight fiscal policy.
B) experienced a shifting of the IS curve to the left due to an increase in interest rates.
C) experienced a movement down and to the right along the IS curve.
D) experienced a shifting of the IS curve to the left due to a decrease in the baseline level of investment spending.

Question

Quizplus · Accepted Answer

During 2002 and 2003, the US economy experienced a period of economic slowdown, which was characterized by a decrease in investment spending among other factors. This decrease in the baseline level of investment spending would shift the IS curve to the left, reflecting a reduction in overall demand at any given interest rate.

During 2002 and 2003, the US Economy