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Exhibit: IS-LM Fiscal Policy Based on the Graph, Starting

question 40

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Exhibit: IS-LM Fiscal Policy Exhibit: IS-LM Fiscal Policy Based on the graph, starting from equilibrium at interest rate r<sub>1</sub> and income Y<sub>1</sub>, a decrease in government spending would generate the new equilibrium combination of interest rate and income: A) r<sub>2</sub>, Y<sub>2.</sub> B) r<sub>3</sub>, Y<sub>2.</sub> C) r<sub>2</sub>, Y<sub>3.</sub> D) r<sub>1</sub>, Y<sub>2.</sub> Based on the graph, starting from equilibrium at interest rate r1 and income Y1, a decrease in government spending would generate the new equilibrium combination of interest rate and income:

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