Question

Suppose in a closed economy aggregate demand is given by AD = A(y,i) where y is real income and i is rate of interest. IS curve represents a locus of different combinations of y and i for which y=A(y,i). What is \(\frac{dy}{di}\) along the IS curve?

• A. \(\frac{A'_j}{1+A'_y}\)
• B. \(\frac{A'_j}{1-A'_y}\)
• C. \(\frac{1-A'_y}{A'_j}\)
• D. \(\frac{1+A'_y}{A'_j}\)

Answer 1

The Correct Option is B

The correct option is(B): \(\frac{A'_j}{1-A'_y}\)