Other things equal, a given change in government spending has a larger effect on demand the:
A) flatter the IS curve.
B) steeper the IS curve.
C) larger the interest sensitivity of expenditure demand.
D) smaller the interest sensitivity of money demand.

Question

Quizplus · Accepted Answer

The steeper the IS curve, the more responsive expenditures are to changes in interest rates. This means that a given change in government spending will have a larger effect on demand when the IS curve is steeper.

Other Things Equal, a Given Change in Government Spending Has