Which of the following would cause the IS curve to shift to the left?
A)an increase in government expenditures
B)a decrease in the money supply
C)an increase in domestic investment
D)a decrease in taxes

Question

Quizplus · Accepted Answer

A decrease in the money supply would cause interest rates to rise, which would reduce investment and consumption spending. This would lead to a decrease in aggregate demand and a leftward shift of the IS curve. An increase in government expenditures (A) and an increase in domestic investment (C) would both shift the IS curve to the right, while a decrease in taxes (D) would increase disposable income and stimulate consumption, also shifting the IS curve to the right.

Which of the Following Would Cause the IS Curve to Shift