In an IS-LM Model, If the Government Enacts Restrictive Fiscal

question 5

Multiple Choice

In an IS-LM model, if the government enacts restrictive fiscal policy through a tax increase or a cut in government purchases,

• A)the interest rate will decline, lowering the incentive to save and thus also the level of investment spending
• B)the level of income will decrease but the interest rate will increase
• C)both income and the interest rate will decrease
• D)the LM-curve will shift to the left
• E)the IS-curve will shift to the left, followed by a shift of the LM-curve to the left since this policy will change interest rates and therefore money demand

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Freight shipping method where a truck is filled with goods for one destination or customer, as opposed to sharing space with goods from other shippers.

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