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Refer to Figure 5 Below

Question 44

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Refer to figure 5 below. In figure 5, national income has fallen from its full employment level YF to a lower level, YU, at which there is unemployment. This may have been due to a decline in exports that has shifted the IS curve to the left. What might cause the LM curve to automatically move to the right and so move the economy back towards YF? Figure 5 Refer to figure 5 below. In figure 5, national income has fallen from its full employment level Y<sub>F</sub> to a lower level, Y<sub>U</sub>, at which there is unemployment. This may have been due to a decline in exports that has shifted the IS curve to the left. What might cause the LM curve to automatically move to the right and so move the economy back towards Y<sub>F</sub>? Figure 5   A)  A rise in the general level of prices in the economy. B)  A fall in the general level of prices in the economy. C)  A rise in government spending. D)  A reduction in taxes.


A) A rise in the general level of prices in the economy.
B) A fall in the general level of prices in the economy.
C) A rise in government spending.
D) A reduction in taxes.

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