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

question 40

Multiple Choice

Exhibit: IS-LM Fiscal Policy 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:

• A)r₂, Y_2.
• B)r₃, Y_2.
• C)r₂, Y_3.
• D)r₁, Y_2.

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Definitions:

Estimated Regression Line

A line calculated from regression analysis that represents the relationship between independent and dependent variables.

Sales

The exchange of a commodity for money; the action of selling something.

Regression Function

A mathematical equation that describes the relationship between one or more independent variables and a dependent variable.

Estimated Regression Line

The line that best fits a set of data points in linear regression, representing the expected value of the dependent variable for any given value of the independent variable.