Use the Following to Answer Questions

question 131

Multiple Choice

Use the following to answer questions :
Exhibit: Policy Interaction
-(Exhibit: Policy Interaction) Based on the graph, starting from equilibrium at interest rate r₃, income Y₂, IS₁, and LM₁, if there is an increase in government spending that shifts the IS curve to IS₂ and the Federal Reserve does not change the money supply, the new equilibrium combination of interest and income will be _____.

• A) r₁, Y₂
• B) r₂, Y₃
• C) r₃, Y₃
• D) r₃, Y₄

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