Which of the following will shift the IS curve down and to the left? an increase in wealth a fall in taxes a decrease in expected future marginal product of capital an increase in expected future output

Economics Nov 28, 2020

Expert Solution

Option (3).

Lower expected marginal product of capital reduces expected productivity, which decreases business investment, shifting IS curve to left.

Higher wealth increases consumption, shifting IS curve to right (1 is wrong).

Lower tax increases consumption, shifting IS curve to right (2 is wrong).

Increase in future output makes firms invest more now, shifting IS curve to right (4 is wrong).

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