Within the IS-LM framework, an expansionary fiscal policy (e.g., a massive increase in government expenditure without increasing taxes) will result in which of the following?

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Economics · Macroeconomics

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Correct answer

A rightward shift of the IS curve, leading to an increase in both the interest rate and national income.

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Answer 1

A rightward shift of the LM curve, leading to a decrease in the interest rate.

Answer 2

A leftward shift of the IS curve, leading to a decrease in national income.

Answer 3

A rightward shift of the IS curve, leading to an increase in both the interest rate and national income.

Answer 4

A parallel shift of the IS and LM curves, leaving the interest rate unchanged.

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