The U.S. recession of 2001 can be explained in part by a declining stock market and terrorist attacks. Both of these shocks can be represented in the IS-LM model by shifting the ______ curve to the ______.
A) LM; right
B) LM; left
C) IS; right
D) IS; left

Question

Quizplus · Accepted Answer

The U.S. recession of 2001, influenced by a declining stock market and terrorist attacks, can be represented in the IS-LM model by shifting the IS curve to the left. These events decreased investment and consumption, reducing aggregate demand, which is captured by a leftward shift of the IS curve.

The US Recession of 2001 Can Be Explained in Part by by a Declining