Question

The fiscal stimulus package of 2009 caused the IS curve to shift to the left, since output decreased and unemployment increased after the policies were implemented.” Is this statement true, false, or uncertain? Explain your answer.

Short answer

The statement about Fiscal Stimulus -that it decreased output & increased unemployment, is True

Step-by-step solution

Introduction

Fiscal Stimulus Package of 2009 was designed by Obama government to address the issue of US crisis 2008. The unemployment rate had risen to 7.6% in December 2009.

The package included $288 billion in tax cuts for households & businesses, $499 billion in increased federal spending.

Explanation 

The package increasing government expenditure & decreasing taxes was expected to shift IS curve to the right, and increase aggregate output level at levels of interest rate.

It rather happened vice versa - most government purchases didn't kick until 2010, decline in autonomous consumption & investment due to economical frictions more than offset the fiscal stimulus.

So, Aggregate Demand rather decreased & IS curve didn't shift, the plan failed.