Question

In the IS-LM model choose all of the following that could lead to an increase in...

In the IS-LM model choose all of the following that could lead to an increase in output, ceteris paribus.

Group of answer choices

Increase in money demand.

Decrease in money supply.

Increase in money supply.

Decrease in household savings.

Increase in household savings.

Decrease in money demand.

Increase in investment.

Decrease in investment.

Decrease in taxes.

Decrease in government purchases.

Increase in taxes.

Increase in government purchases.

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Homework Answers

Answer #1

There are two possibilities for increase in output: shift of the IS curve to the right and shift of the LM curve to the right.

IS curve will be shifting to the right in case of increase in investment increase in government purchases and decrease in taxes. LM curve will be shifting to the right in case of increase in money supply and decrease in money demand. Besides, decrease in household savings will also increase output.

Therefore select increase in investment increase in government purchases and decrease in taxes, increase in money supply and decrease in money demand and decrease in household savings.

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