If the United States Cuts Its Government Budget Deficit, What

question 6

Multiple Choice

If the United States cuts its government budget deficit, what impact would there be on the IS curve?

• A) It would shift right due to higher levels of total spending.
• B) It would shift left due to lower levels of total spending.
• C) It would shift left because of lower levels of total spending, and it would shift right if U.S. interest rates decline due to lower borrowing.
• D) It would shift left because of higher nominal and real interest rates due to increased borrowing.

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