Consider the short-run model. Suppose the economy starts in a situation where there are no AD shocks (normal-times AD) and the real interest rate is equal to the MPK. Suppose that the government increases its purchases to launch a large infrastructures program. Assuming the Fed keeps the interest rate unchanged, which curve will shift in the IS-MP diagram and how?

a-A reduction in the risk premium associated to borrowing and lending would shift the PC curve up.

b-A reduction in the risk premium associated to borrowing and lending would shift the PC curve down.

c-A reduction in the risk premium associated to borrowing and lending would shift the IS curve to the right.

d-A reduction in the risk premium associated to borrowing and lending would shift the MP curve down.