The IS curve is constructed by:
A)plotting savings at each real interest rate.
B)adding consumption and savings at each real interest rate.
C)adding up the level of aggregate expenditure at each real interest rate.
D)adding up consumption and investment and plotting these two expenditure levels to income.

Question

Quizplus · Accepted Answer

The IS curve shows the combinations of real interest rates and output levels where the level of aggregate expenditure (i.e., the sum of consumption, investment, and government spending) is equal to output. Therefore, the IS curve is constructed by adding up the level of aggregate expenditure at each real interest rate.

The IS Curve Is Constructed By