If the IS curve is negatively sloped and the LM curve is positively sloped
A)an increase in government expenditures will raise real GDP and lower interest rates.
B)a fall in the real money supply will raise real GDP and lower the interest rate.
C)an increase in taxes and an increase in money supply will lower the interest rate and give little or no change in real GDP.
D)an increase in taxes and a fall in the money supply will raise the interest rate and give little or no change in real GDP.

Question

Quizplus · Accepted Answer

An increase in taxes would typically decrease consumption and shift the IS curve to the left, leading to lower interest rates and potentially lower real GDP. An increase in the money supply shifts the LM curve to the right, lowering interest rates and potentially increasing real GDP. However, when these two actions are combined, the effect on real GDP might cancel out, leading to little or no change in real GDP but a clear decrease in interest rates due to the dominant effect of the increased money supply.

If the IS Curve Is Negatively Sloped and the LM