Question

What does the IS curve​ show? A. It shows equilibrium points in the goods marketlong dashthe combinations of the real interest rate and equilibrium output. B. It shows equilibrium points in the goods marketlong dashthe combinations of planned investment spending and net exports. C. It shows equilibrium points in the goods marketlong dashthe combinations of the real interest rate and net exports. D. It shows equilibrium points in the goods marketlong dashthe combinations of planned expenditure and equilibrium output.

Answer 1

Option (A) is correct.

Step-by-step explanation:

Investment spending curve refers to the curve shows various combination of real interest rate and the equilibrium output. There is a negative relationship between the real interest rate and output which means that an increase in the real interest rate will reduce the output of an economy and if there is a fall in the real interest rate then as a result there is an increase in the output.