When drawn on a graph with income along the horizontal axis and the interest rate along the vertical axis, the IS curve:
A)is vertical.
B)is horizontal.
C)slopes upward and to the right.
D)slopes downward and to the right.

Question

Quizplus · Accepted Answer

The IS curve represents equilibrium in the goods market, where investment equals savings. It slopes downward and to the right because as income increases, the interest rate must decrease to maintain equilibrium, reflecting the inverse relationship between interest rates and income.

When Drawn on a Graph with Income Along the Horizontal