An increase in investment demand for any given level of income and interest
rates—due, for example, to more optimistic "animal spirits"—will, within the is-lm
framework, output and interest rates.
a) increase; lower
b) increase; raise
c) lower; lower
d) lower; raise

The correct answer is B) increase; raise

Explanation:

The increase in the amount of investment will cause the increase in real production. Moreover, an increase in the investment decisions of entrepreneurs will have a multiplier effect on the economy since it will allow an increase in the income of the factors of the investment goods industry; part of this increase will be used for consumption which will cause cascading increases in the income of other factors.

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