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

Question

Quizplus · Accepted Answer

An increase in investment spending causes an overall increase in aggregate demand, leading to a rise in equilibrium level of aggregate output. As a result, the IS curve shifts to the right as well.

An Increase in Investment Spending Because Companies Become More Optimistic