In the Keynesian cross diagram,an increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ________,the equilibrium level of aggregate output to rise,and the IS curve to shift to the ________,everything else held constant.
A)up;left
B)up;right
C)down;left
D)down;right

Question

Quizplus · Accepted Answer

An increase in investment spending will shift the aggregate demand function upwards, leading to an increase in the equilibrium level of aggregate output. This shift will cause the IS curve to shift to the right, as the relationship between output and interest rates will change due to the increase in investment spending.

In the Keynesian Cross Diagram,an Increase in Investment Spending Because