If the IS curve is downward sloping and the LM curve is vertical, a unit increase in government expenditure results in
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DSE 2006 Question 6: IS-LM model
Answer and worked solution
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IS-LM model has come up 137 times in 7 exams since 2004.
What this question tests
This question is on Fiscal policy and crowding out in IS-LM, part of IS-LM model in Macroeconomics.
How government spending and taxes move income and the interest rate, and how much private spending is displaced.
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Question from the DSE 2006 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.