Answer :
When equilibrium output varies at a specific real interest rate, the IS curve shifts.
What might cause the IS curve to change?
The IS curve shifts to the left whenever a change (such as a reduction in government consumption, an increase in taxation, or a decline in consumer confidence, as measured by c0) lowers the demand for goods at a given interest rate.
Which of the following causes the IS curve to change?
When C, I, G, or NX increase (drop), or T decreases, the IS curve shifts to the right (left) (increases). This is directly related to the Keynesian cross diagrams, the formula Y = C + I + G + NX, which are covered in Chapter 21 "IS-LM," as well as the analysis of taxes as a reduction in consumer expenditure C.
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