Consider an initial IS-LM equilibrium point which corresponds to a point labeled "A" on the current AD curve.
-Refer to the information above.If business confidence improves with no change in the price level,the resulting IS-LM equilibrium corresponds to a point in the AD diagram
A)which has moved downward along the same AD curve.
B)straight above A on a new AD curve.
C)straight below A on a new AD curve.
D)directly to the right of A on a new AD curve.
E)directly to the left of A on a new AD curve.

Question

Quizplus · Accepted Answer

An improvement in business confidence increases investment, shifting the IS curve to the right. This results in a higher equilibrium output at the same price level, moving the economy to a point directly to the right of A on the AD curve, indicating higher aggregate demand.

Consider an Initial IS-LM Equilibrium Point Which Corresponds to a Point