The IS curve shifts to the left when ________.
A)autonomous consumption increases
B)taxes decrease
C)autonomous investment decreases
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The IS curve represents the relationship between output and interest rate in the goods market. Autonomous investment is an important component of aggregate demand and when it decreases, it leads to a decrease in output at every interest rate level. This shift is captured by a leftward shift of the IS curve. Autonomous consumption increase and taxes decrease would lead to an increase in aggregate demand and shift the IS curve to the right, making options A and B incorrect. Therefore, the correct answer is C.

The IS Curve Shifts to the Left When ________