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

Question

Quizplus · Accepted Answer

The IS curve shows the relationship between real interest rates and output, holding other factors constant. Autonomous investment increases will shift the IS curve to the right, indicating that output and real interest rates increase, and vice versa. Autonomous consumption decreases or increasing taxes will shift the IS curve to the left. Thus, option A and B are incorrect. Option D is incorrect because while autonomous consumption decreases or tax increase shift the IS curve to the left, autonomous investment increases shift the IS curve to the right. Therefore, option C is the correct choice.

The IS Curve Shifts to the Right When ________