In an IS-LM Framework, Fiscal Expansion Generally Leads to Income

question 46

Multiple Choice

In an IS-LM framework, fiscal expansion generally leads to income expansion

• A)only if it is combined with monetary expansion
• B)except if we are in the liquidity trap
• C)but interest rates will increase, leading to a lower level of saving
• D)but the composition of output will change
• E)but most consumption spending will be crowded out

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