Suppose that a bond-financed deficit shifts the IS curve to the right, taking IS-LM equilibrium "northeast" from point A to point B
If government bonds are considered net wealth by the public sector, then by the portfolio theory of asset-holding there is an excess ________ money at point B because the LM curve has shifted ________ with increased wealth, and thus the fiscal policy turns out to be ________ expansionary than without the wealth effect. A) demand for, downward, more
B) demand for, downward, less
C) demand for, upward, less
D) supply of, downward, more
E) supply of, upward, more
C
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