If the combination r = 5% and Y = $450 billion is on the IS curve, we know that the combination r = 5% and Y = $300 billion would represent
A) the IS curve shifting to the right.
B) the IS curve shifting to the left.
C) a movement up the IS curve.
D) a movement down the IS curve.

Question

Quizplus · Accepted Answer

A decrease in output (Y) from $450 billion to $300 billion at the same interest rate (r = 5%) suggests a leftward shift of the IS curve, indicating a decrease in aggregate demand.

If the Combination R = 5% and Y = $450