A decrease in autonomous investment ________.
A)decreases equilibrium output at any interest rate
B)lowers planned expenditures
C)shifts the IS curve to the left
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

Autonomous investment refers to investments that businesses make independently, i.e., regardless of the level of economic activity. A decrease in autonomous investment leads to a lower level of planned expenditures, which in turn leads to a decrease in equilibrium output at any interest rate. This shift of planned expenditures leads to a shift in the IS curve to the left, as the level of output corresponding to each interest rate decreases. Hence, option D is the best choice as all the options mentioned are correct.

A Decrease in Autonomous Investment ________