A rise in autonomous planned investment spending causes the equilibrium level of aggregate output to ________ and shifts the ________ curve to the ________,everything else held constant.
A)rise;LM;right
B)rise;IS;right
C)fall;IS;left
D)fall;LM;left

Question

Quizplus · Accepted Answer

Planned investment spending is an autonomous component that shifts the IS curve. An increase in autonomous planned investment spending shifts the IS curve to the right, increasing the equilibrium level of output. The LM curve, on the other hand, is not affected by changes in planned investment spending but by changes in the money supply, so A and D are incorrect. A fall in autonomous planned investment spending would shift the IS curve to the left and decrease the equilibrium level of output, making C incorrect.

A Rise in Autonomous Planned Investment Spending Causes the Equilibrium