The intercept of the IS curve depends on each of the following except
A) the level of government purchases.
B) the baseline level of the real exchange rate.
C) the long-term real interest rate.
D) the exchange rate sensitivity of exports.

Question

Quizplus · Accepted Answer

The IS curve, which represents the relationship between the interest rate and the level of income that brings the goods market into equilibrium, is influenced by factors such as government purchases, the real exchange rate, and the sensitivity of exports to the exchange rate. The long-term real interest rate, however, is not a determinant of the IS curve's intercept; it influences the position of the curve but is more directly related to the LM curve, which represents money market equilibrium.

The Intercept of the IS Curve Depends on Each of the Following