Suppose individuals now believe that there will be an increase in the future expected interest rate. This increase in the expected future interest rate will cause which of the following to occur in the current period?

A) an upward shift of the LM curve

B) the LM curve to become steeper

C) a leftward shift of the IS curve

D) the IS curve to become flatter

E) none of the above

Suppose individuals expect that interest rates will decrease in the future. Also assume that the central bank wants to prevent any change in current output. Given this goal, the central bank should implement a policy in the current period that

A) shifts the IS curve leftward and the LM curve upward.

B) shifts the IS curve rightward.

C) shifts the LM curve downward.

D) shifts the LM curve upward.

E) shifts the IS curve leftward.

Suppose there is a reduction in expected future taxes. This will cause which of the following to occur?

A) the IS curve to shift right in the current period

B) the IS curve to shift left in the current period

C) the LM curve to shift down in the current period

D) the LM curve to shift up in the current period

Answer rating: 100% (QA)

Correct answer is C A leftward shift of the IS curve Because here given there will be an increase in ... View the full answer