In an IS-LM Model, an Increase in Autonomous Spending

question 2

Multiple Choice

In an IS-LM model, an increase in autonomous spending

• A)is caused by a fall in the interest rate
• B)will cause a fall in the interest rate
• C)will lead to an increase in income and the interest rate
• D)will shift the LM-curve to the right
• E)is caused by a movement along the IS-curve from left to right

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Definitions:

External Benefits

Positive effects of an economic transaction experienced by people or entities not directly involved in the transaction.

External Costs

Costs that are not borne by the producer or consumer but by third parties or society at large, such as pollution or resource depletion.

External Benefit

A positive effect on a party who did not choose to incur that benefit, often associated with public goods or services.

Public‐spirited

Exhibiting a selfless concern for the well-being of the community and the willingness to act for the public good.