The IS curve ________.
A) shows the relationship between aggregate output and the real interest rate when the goods market is in equilibrium
B) tells us that increases in autonomous consumption, investment, government purchases, or net exports raise output for any real interest rate
C) tells us that a decrease in taxes or in financial frictions leads to an increase in output for any given real interest rate
D) all of the above
E) none of the above
Question 2
Consumption smoothing is a logical consequence of ________.
A) basing decision-making on real rather than nominal interest rates
B) the convexity of indifference curves and the ability to borrow and lend
C) the negative slope fo the intertemporal budget constraint
D) rational expectations
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