Answer to Question #67214 in Macroeconomics for Jia Khan
four factors of shifting IS curve
1.Change in Fiscal policy (G):
The government can increase government spending (shifting IS right) or decrease government spending (shifting IS left).
The government can increase taxes which lowers consumer spending (shifting IS left) or decrease taxes which increases consumer spending (shifting IS right).
2.Consumers can change their savings rate (C):
If consumers decide to save more (marginal propensity to consume declines) then consumer spending declines and the IS curve shifts left.
If consumers decide to save less (marginal propensity to consume rises) then consumer spending increases and the IS curve shifts right.
3. Change in net exports (NX):
If net exports increase (due to currency depreciation) we will see the IS curve shift right.
If net exports decrease (due to currency appreciation) we will see the IS curve shift left.
4.A change in private fixed investment (I)
If consumers/firms feel more confident about the future, they may invest more regardless of the interest rate. This will cause an increase in investment (IS shifts right).
If consumers/firms feel less confident about the future, they may invest less regardless of the interest rate. This will cause a decrease in investment (IS shifts left).
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