Which of the following is an example of a shock that could shift the IS curve to the right?

A. A decrease in taxes

B. A decrease in consumption

C. A decrease in investment

D. An increase in real interest rates

Expert Solution

The right answer is option A, that is, a decrease in taxes. When the taxes decreases it implies that people will have more income to spend on the consumption of goods and services, therefore, decrease in taxes will increase the aggregate demand in the economy which will shift the IS curve to the right.

Rahul Sunny answered 2 years ago

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