The IS curve shows the combinations of output and the real interest rate for which
A)the goods market is in equilibrium.
B)the labour market is in equilibrium.
C)the financial asset market is in equilibrium.
D)an increase in output will cause the market-clearing interest rate to be bid up.

Question

Quizplus · Accepted Answer

The IS curve shows the combinations of output and the real interest rate for which the goods market is in equilibrium. This means that the level of output generated by firms is equal to the level of output demanded by households and firms. The real interest rate adjusts to maintain this equilibrium.

The IS Curve Shows the Combinations of Output and the Real