An increase in autonomous investment ________.
A)increases equilibrium output at any interest rate
B)causes a movement down along the IS curve
C)shifts the IS curve to the left
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

Autonomous investment is investment that is not influenced by changes in the interest rate. An increase in autonomous investment causes an increase in aggregate demand, which leads to an increase in equilibrium output at any interest rate. Therefore, choice A is the correct answer. Choices B and C are incorrect because an increase in autonomous investment would shift the IS curve to the right, not to the left, and would cause a movement up along the IS curve, not down.

An Increase in Autonomous Investment ________