At a point below the IS curve,
A)there is an excess supply of goods.
B)there is an excess demand for goods.
C)saving exceeds investment.
D)the real interest rate is above its equilibrium value.

Question

Quizplus · Accepted Answer

At a point below the IS curve, there is an excess demand for goods. This is because the level of output is less than the level of output demanded at the given interest rate. As a result, firms will increase production to meet this excess demand, leading to an increase in the level of output and a movement along the IS curve towards the equilibrium point.

At a Point Below the IS Curve