Explain the effect of each of the following on the IS curve.a. Government spending decreasesb....

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Explain the effect of each of the following on the IS curve.a. Government spending decreasesb. Foreign demand for the country's exports increases.c. The country's interest rate increases

David · Accepted Answer

Explain the effect of each of the following on the IS curve.a. Government spending decreasesb. 
Foreign demand for the country's exports increases.c. The country's interest rate increases
IS equation =  
Y = C(Y-T(Y))+I(r)+G+NX(Y) 
Answer a. IS curve will shift left if the Government spending decreases and other factors are constant. 
Because Real interest would be lower and real GDP would be lower. Like The government can 
increase taxes which lowers consumer spending (shifting IS left). 
Answerb.

Explain the effect of each of the following on the IS curve.a. Government spending decreasesb. Foreign demand for the country's exports increases.c. The country's interest rate increases

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