The IS curve shifts when any of the following economic variables change except:

Question

BlackTom AI · Accepted Answer

Begin by clarifying what the IS curve represents: it is the set of combinations of output (Y) and the interest rate (i) for which the goods market is in equilibrium (total spending equals output). A shift in the IS curve occurs when a non-interest-rate factor changes the level of planned spending at each interest rate.

Option 1: the interest rate. The IS curve relies on the relationship between i and aggregate demand; however, a change in the interest rate by itself moves the economy along the existing IS curve rather than shifting the curve. In other words, changing i alters the position on the same curve, not the entire curve’s position.

Option 2: government spending. An increase or decrease in government spending directly changes aggregate demand at every interest rate, shifting the IS curve to the right (an expansion) or to the left (a contraction). This is a classic cause of a shift in the goods-market equilibrium relationship.

Option 3: tax rates. Changes in taxes affect disposable income and consumption, thereby altering planned spending at all interest rates. A tax cut typically increases aggregate demand, shifting the IS curve right; a tax hike shifts it left. This constitutes a shift of the entire IS curve.

Option 4: the marginal propensity to consume. The MPC determines how much of any change in disposable income is spent. A higher MPC means spending responds more to income changes, effectively shifting the IS curve because the same change in income leads to a larger rise in spending at each interest rate. A lower MPC weakens that response, shifting the curve in the opposite direction.

In sum, the only factor that does not shift the IS curve by itself is the pure change in the interest rate, which causes movement along the curve instead of a shift of the curve itself. The other options represent changes that alter aggregate demand at every interest rate and thus relocate the IS curve.

BU.220.610.51.FA25 M8 Final Comprehensive Exam - Multiple Choice Questions- Requires Respondus LockDown Browser

The IS curve shifts when any of the following economic variables change except:

View Explanation

Log in for full answers

Similar Questions

If, in addition, 𝑅 𝑡 = 𝑟 ¯ , short run output [ Select ] .

When the LM curve is drawn, the quantity that is held fixed is:

If the short-run IS-LM equilibrium occurs at a level of income below the natural level of output, then in the long run the price level will , shifting the __ curve to the right and returning output to the natural level.

In the IS-LM model, a decrease in government purchases leads to a(n) in planned expenditures, a(n) in total income, a(n) in money demand, and a(n) in the equilibrium interest rate.

According to the IS-LM model, if Congress raises taxes but the Fed wants to hold income constant, then the Fed must ______ the money supply.

An increase in the money supply shifts the curve to the right, and the aggregate demand curve __.

Other things equal, a given change in money supply has a larger effect on demand the:

The tax decrease makes the interest rate and investment in this model.

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler

BU.220.610.51.FA25 M8 Final Comprehensive Exam - Multiple Choice Questions- Requires Respondus LockDown Browser

The IS curve shifts when any of the following economic variables change except:

View Explanation

Log in for full answers

Similar Questions

If, in addition, 𝑅 𝑡 = 𝑟 ¯ , short run output [ Select ] .

When the LM curve is drawn, the quantity that is held fixed is:

If the short-run IS-LM equilibrium occurs at a level of income below the natural level of output, then in the long run the price level will __, shifting the ____ curve to the right and returning output to the natural level.

In the IS-LM model, a decrease in government purchases leads to a(n) ______ in planned expenditures, a(n) ______ in total income, a(n) ______ in money demand, and a(n) ______ in the equilibrium interest rate.

According to the IS-LM model, if Congress raises taxes but the Fed wants to hold income constant, then the Fed must ______ the money supply.

An increase in the money supply shifts the __ curve to the right, and the aggregate demand curve ____.

Other things equal, a given change in money supply has a larger effect on demand the:

The tax decrease makes the interest rate ______ and investment ______ in this model.

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

If the short-run IS-LM equilibrium occurs at a level of income below the natural level of output, then in the long run the price level will , shifting the __ curve to the right and returning output to the natural level.

In the IS-LM model, a decrease in government purchases leads to a(n) in planned expenditures, a(n) in total income, a(n) in money demand, and a(n) in the equilibrium interest rate.

An increase in the money supply shifts the curve to the right, and the aggregate demand curve __.

The tax decrease makes the interest rate and investment in this model.