Economics · IS-LM Model
In the IS-LM model, an increase in the level of government spending, ceteris paribus, will lead to which of the following outcomes?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1An increase in interest rates, shifting the LM curve to the left.
- 2An increase in the level of equilibrium income at all interest rates, shifting the IS curve to the right.✓
- 3Always moving the economy directly to full employment.
- 4A lowering of interest rates, shifting the LM curve to the right.
Correct answer
An increase in the level of equilibrium income at all interest rates, shifting the IS curve to the right.
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