Answered: Why does the IS curve slope downward?

Business

Economics

Why does the IS curve slope downward?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter16: Expectations Theory And The Economy

Section: Chapter Questions

Problem 2QP

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Question

Why does the IS curve slope downward?

Expert Solution

Step 1

The IS-LM is an important macroeconomic model that represents the simultaneous equilibrium in both the product markets as well as the money markets. The IS curve denotes the relationship between the different combination of rate of interest and national income at which equilibrium is attained in the product market, that is where savings are equal to the investments.

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