In the standard IS-LM framework, an equal and simultaneous reduction in and will cause
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JNU SIS 2011 Question 14: IS-LM model
Answer and worked solution
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Plain-text version
In the standard IS-LM framework, an equal and simultaneous reduction in G and T will cause (A) an increase in investment (B) no change in output (C) reduction in output (D) increase in interest rate
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.
TestStop has 17 past-paper questions on this subtopic.
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