The IS Curve Becomes Steeper When

question 69

Multiple Choice

The IS curve becomes steeper when

• A)government spending is relatively small.
• B)the income tax rate in the current period is relatively small.
• C)current changes in the real interest rate cause large changes in current real output.
• D)changes in the current real interest rate cause small changes in current demand.
• E) none of the above

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Definitions:

Real GDP

The measure of a country's economic output adjusted for price changes (inflation or deflation), providing a more accurate reflection of an economy's size by valuing goods and services at constant prices.

Price Level

The average of the current prices of all goods and services in an economy, often compared to a base year's prices to assess inflation.

Aggregate Expenditure

The total spending on final goods and services in an economy, including consumption, investment, government spending, and net exports.

Marginal Propensity

The tendency of an individual or household to spend an extra unit of currency, reflecting the change in consumption from a change in income.