In the basic closed-economy ISLM model,the IS curve can be described by an equation where
A)output is a function of consumption.
B)money is a function of interest rates.
C)output is a function of money.
D)output is a function of interest rates.

Question

Quizplus · Accepted Answer

In the basic closed-economy ISLM model, the IS curve represents the combinations of interest rates and levels of output at which goods markets are in equilibrium. Therefore, the IS curve can be described by an equation where output is a function of interest rates. This is because the level of output in the goods market depends on the demand for goods, which in turn depends on the interest rate (as it affects consumption and investment).

In the Basic Closed-Economy ISLM Model,the IS Curve Can Be