Suppose that the government runs a budget surplus.Then:
A) The IS curve shifts right
B) The IS curve shifts left
C) The LM curve shifts right
D) The LM curve shifts left

Question

Quizplus · Accepted Answer

A budget surplus typically means the government is spending less than it is earning in revenue, which can lead to a decrease in aggregate demand. This decrease in aggregate demand causes the IS curve, which represents equilibrium in the goods market, to shift to the left.

Suppose That the Government Runs a Budget Surplus.Then