The IS curve is negatively inclined because:

Question

Quizplus · Accepted Answer

According to the Keynesian theory, the IS (investment savings) curve represents the equilibrium conditions in the goods market. It shows the combinations of interest rates and levels of income where the demand for goods (investment and consumption) equals the supply of goods (national income). When interest rates are lower, the cost of borrowing decreases, and businesses are more likely to invest, leading to a higher level of national income. Therefore, the IS curve is negatively inclined, as the lower interest rates lead to higher levels of investment and national income.

The IS Curve Is Negatively Inclined Because