Consider the following model of the IS curve, without an international sector:
Consumption: Ci-ac Y,
Investment: I,-a, Y,; and
Government expenditure: G,-ag Y,
With this formulation the IS curve, drawn the usual way, with real interest rate in the vertical axis, and short-run output in the horizontal axis, is:
a. horizontal.
b. less steeply sloped than the "standard" IS curve, but not horizontal.
c. vertical.
d. more steeply sloped than the "standard" IS curve, but not vertical.
e. Not enough information is given E.
