Suppose Fiscal Policy Makers Implement a Policy to Increase the Size

Multiple Choice

Suppose fiscal policy makers implement a policy to increase the size of a budget deficit. Based on the IS- LM model, we know with certainty that the following will occur as a result of this fiscal policy action:

A) The price level increases.
B) Output increases.
C) Investment spending decreases.
D) Output decreases.
E) Investment spending increases.