If the central bank exogenously determines the interest rate, it remains constant, resulting in a horizontal LM curve within the interest rate-income plane.
Consequently, the correct answer is (c).
Which of the following statements are correct about the IS curve?
(A) It shows the combination of the interest rate and the level of income such that the money market is in equilibrium.
(B) It is negatively sloped.
(C) The smaller the multiplier and the more sensitive investment spending is to changes in the interest rate, the steeper the IS curve.
(D) An increase in government purchases shifts the IS curve to the right.
Choose the correct answer from the options given below:
In the context of the Keynesian concept of a multiplier, a \(\$\)1 increase in government spending financed by a \(\$\)1 increase in taxes will cause equilibrium income to: