The IS curve provides combinations of interest rates and income that satisfy equilibrium in the market for ______, and the LM curve provides combinations of interest rates and income that satisfy equilibrium in the market for ______.
A) saving and investment; planned spending
B) real-money balances; loanable funds
C) goods and services; real money balances
D) real-money balances; goods and services

Question

Quizplus · Accepted Answer

The IS curve represents equilibrium in the goods and services market, where investment equals saving, while the LM curve represents equilibrium in the money market, where demand for and supply of real money balances are equal.

The IS Curve Provides Combinations of Interest Rates and Income