According to the IS equation,a change in which of the following will cause a change in output?
A)real interest rate
B)autonomous investment
C)marginal propensity to consume
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The IS equation is Y = C(Y-T) + I(r) + G + NX, where Y is output, C is consumption, T is taxes, I is investment, r is the real interest rate, G is government spending, and NX is net exports. From this equation, we can see that output is affected by changes in autonomous investment (I), as well as changes in the marginal propensity to consume (C) through changes in disposable income (Y-T). Additionally, changes in the real interest rate (r) will also affect output as it influences investment spending. Therefore, all of the above choices (A, B, and C) will cause a change in output.

According to the IS Equation,a Change in Which of the Following