If the economy is on the IS curve,but is to the right of the LM curve,aggregate output will ________ and the interest rate will ________.
A)rise;rise
B)rise;fall
C)fall;rise
D)fall;fall

Question

Quizplus · Accepted Answer

When the economy is on the IS curve but to the right of the LM curve, it indicates that the interest rate is higher than the equilibrium rate for the current level of output, leading to a decrease in investment and aggregate output. Consequently, to restore equilibrium, the interest rate will rise to decrease investment demand and bring the economy back to the intersection of the IS and LM curves.

If the Economy Is on the IS Curve,but Is to the Right