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Is-lm model investment

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Reference no: EM132512088

Which of the following statements are correct?

a. According to the IS-LM model investment spending will increase if there is a decrease in the interest rate and/or an increase in income or output.

b. The higher the interest rate, the higher the cost of borrowing will be and the higher the opportunity cost of holding own funds will be.

c. There is a positive relationship between the level of output and income and the level of investment spending and a negative relationship between interest rate and level of investment spending.

d. Investment takes place when firms increase their spending on capital goods.

1. a, b, c and d

2. Only a, b and d

3. Only b, c and d

4. Only a, c and d

5. Only a and d

Reference no: EM132512088

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