The inauguration of a new President often increases the degree of optimism in foreign business firms and foreign households,causing net exports to
A)decrease and IS to shift right.
B)decrease and IS to shift left.
C)increase and IS to shift right.
D)increase and IS to shift left.

Question

Quizplus · Accepted Answer

With the increased optimism, foreign business firms and households are more likely to purchase goods and services from the US, therefore increasing net exports. This would shift the IS curve to the right, as output and interest rates increase.

The Inauguration of a New President Often Increases the Degree