The IS curve ________.
A)traces out the points at which the goods market is in equilibrium
B)tells us that consumption expenditures fall as the real interest rises
C)tells us that as the real interest rate rises planned expenditures go down leading to decreases in output that satisfy the goods market equilibrium
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The IS curve represents the relationship between the interest rate and the level of income that ensures the goods market is in equilibrium. It implies that as the real interest rate increases, consumption and planned expenditures decrease, leading to a decrease in output that maintains goods market equilibrium. Thus, all the statements A, B, and C correctly describe aspects of the IS curve.

The IS Curve ________