Spxetestia-1/31584348centerwin Econ 3001 Wintersession 2017/2018 Quiz: Quiz Chap

Question

Spxetestia-1/31584348centerwin Econ 3001 Wintersession 2017/2018 Quiz: Quiz Chapter 20 This Question: 1 pt 4 of 32 (13 complete) If taxes decrease and autonomous consumption expenditure decrease, the IS curve A. will shift left. B. may shift right, left, or not shift at all C. will shift right. O D. will not shift During financial crises, financial frictionseading to a shift of the IS curve. OA, increase;rightward O B. decrease; leftward O C. decrease, rightward OD. increase, leftward Purchase Options (in Course Home

Explanation / Answer

B is correct

Decrease in taxes increases consumption expenditure due to increase in disposable income. This shifts IS curve to the right.

Decrease in autonomous consumption shifts IS curve to the left.

If decrease in autonomous consumption is greater than decrease in taxes, IS shifts to the left. If decrease in autonomous consumption is less than decrease in taxes IS shifts to the right. If decrease in both is same, IS does not shift.

D is correct

During financial crises financial fictions increase and reduces investment which lowers spending leading to leftwards shift in IS.

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