When the Multiplier Is Included in the IS Curve

question 80

Multiple Choice

When the multiplier is included in the IS curve:

• A) a demand shock has a larger impact on short-run fluctuations than with the standard IS curve
• B) a change in the real interest rate has a smaller impact on short-run fluctuations than with the standard IS curve
• C) a demand shock has a smaller impact on short-run fluctuations than with the standard IS curve
• D) a change in taxes has no impact on short-run output
• E) a change in the marginal product of capital has a smaller effect on short-run fluctuations in output than with the standard IS curve

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Definitions:

Demand Curve

An illustrative chart depicting how the cost of an item correlates with consumer demand for that item.

Perfectly Inelastic

A market scenario where demand or supply does not change in response to price changes.

Industry's Demand

The total demand for all the products or services provided by a specific sector of the economy.

Marginal Decision Rule

A principle used in economics and decision-making that recommends comparing the additional benefits of a decision or action to its additional costs.