Based on Our Understanding of the IS- LM Model That

Multiple Choice

Based on our understanding of the IS- LM model that takes into account dynamics, we know that a decrease in government spending will cause:

A) an immediate decrease in i and no initial change in Y.
B) a gradual increase in i and a gradual decrease in Y.
C) a gradual decrease in i and a gradual decrease in Y.
D) a gradual decrease in i and a gradual increase in Y.
E) an immediate decrease in Y and immediate increase in i.