Which of the following is true of the relationship between the curve and the curve?
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JNU SIS 2014 Question 18: IS-LM model
Answer and worked solution
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Plain-text version
Which of the following is true of the relationship between the IS curve and the AD curve? (A) The commodity market must be in equilibrium along the IS curve but it may not be in equilibrium along the AD curve (B) An increase in government spending will shift the IS curve but it will not shift the AD curve (C) The steeper the IS curve, the steeper the AD curve (D) A horizontal shift of the AD curve is typically greater than the horizontal shift in the IS curve due to crowding out
IS-LM model has come up 137 times in 7 exams since 2004.
What this question tests
This question is on Deriving aggregate demand from IS-LM, part of IS-LM model in Macroeconomics.
How varying the price level in IS-LM traces out the aggregate demand curve.
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