Figure 4.1
-In Figure 4.1, the most likely cause of a decrease in the equilibrium interest rate from i₂ to i₁ is

Question

Figure 4.1 -In Figure 4.1, the most likely cause of a decrease in the equilibrium interest rate from i₂ to i₁ is

Quizplus · Accepted Answer

The decrease in the equilibrium interest rate from i₂ to i₁ is most likely caused by a decrease in the expected inflation rate. This shifts the IS curve to the left from IS1 to IS2, reducing the equilibrium interest rate from i₂ to i₁. Therefore, the correct answer is B.

Figure 4.1 -In Figure 4.1, the Most Likely Cause of a Decrease