Discussion
Which of the following statement is false ?
Answer: A
The first statement is false. The IS curve is flatter when the Keynesian multiplier is larger and when investment is more responsive to the interest rate, not when the multiplier is lower and investment is less responsive.
The second statement states it correctly, that the IS curve is steeper with a lower multiplier and a lower interest responsiveness. The statements about the LM curve are also correct standard results, so the one that reverses the IS relationship is the false statement.
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