A Decrease in the Expected Future Interest Rate Will Cause

question 12

Multiple Choice

A decrease in the expected future interest rate will cause:

• A) a rightward shift of the IS curve.
• B) an upward shift of the LM curve.
• C) the LM curve to become steeper.
• D) a downward shift of the LM curve.
• E) the IS curve to become flatter.

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Definitions:

Mental Set

A tendency to approach a problem in one particular way, often a way that has been successful in the past.

Classifying Objects

The cognitive process of organizing items into categories based on shared characteristics.

Algorithms

A defined set of step-by-step procedures or rules followed in calculations or problem-solving operations, especially by a computer.

Fixations

An obsessive focus or attachment to some aspect of psychological or emotional development.