When drawn against the real interest rate,the output supply curve unambiguously shifts to the right if either or both of the following occur.
A) an increase in current government spending and an increase in future government spending
B) an increase in current government spending and a decrease in future government spending
C) a decrease in current government spending and an increase in future government spending
D) a decrease in current government spending and a decrease in future government spending
E) a decrease in current government spending and an increase in the real interest rate

Question

Quizplus · Accepted Answer

An increase in government spending, both current and future, leads to an increase in output, which shifts the output supply curve to the right. The real interest rate does not affect the direction of the shift. The other options do not have a clear, unambiguous relationship with the output supply curve.

When Drawn Against the Real Interest Rate,the Output Supply Curve