The IS curve depicts the relationship between
A) aggregate output and the real interest rate.
B) investment demand and the real interest rate.
C) investment demand and the level of current output.
D) national saving and the level of current output.

Question

Quizplus · Accepted Answer

The IS curve shows the relationship between aggregate output (Y) and the real interest rate (r). It represents the equilibrium in the goods market, where output equals demand. This equilibrium is affected by changes in the interest rate, which affects investment and consumption.

The IS Curve Depicts the Relationship Between