The Reason That the Income Response to a Fiscal Expansion

Multiple Choice

The reason that the income response to a fiscal expansion is generally less in the IS-LM model than it is in the Keynesian-cross model is that the Keynesian-cross model assumes that:

A) investment is not affected by the interest rate whereas in the IS-LM model fiscal expansion raises the interest rate and crowds out investment.
B) investment is not affected by the interest rate whereas in the IS-LM model fiscal expansion lowers the interest rate and crowds out investment.
C) investment is autonomous whereas in the IS-LM model fiscal expansion encourages higher investment, which raises the interest rate.
D) the price level is fixed whereas in the IS-LM model it is allowed to vary.