Table of Contents

## What do you mean by IS curve?

**shows combinations of interest rates and levels of output such that planned spending equals income**. ‘OR’ The IS Curve represents various combinations of interest and income along which the goods market is in equilibrium.

## Why is it called the IS curve?

**derives from the property that it represents that desired investment equals desired saving**. i(r)=[y−t −c(y)] + (t −g). The left-hand side is desired investment.

## WHAT IS IS curve and how it is derived?

**derived from goods market equilibrium**. The IS curve shows the combinations of levels of income and interest at which goods market is in equilibrium, that is, at which aggregate demand equals income.

## How do you find the IS curve?

## What is the IS and LM curve?

## What are the properties of IS curve?

**slopes downwards to the right**. Or it has a negative slope. Its slope depends on the saving function and investment function. The IS curve will be relatively steep (flat) if investment is less (more) sensitive to interest rate changes.

## What is the slope of IS curve?

**depends on the saving function whose slope is MPS**. The higher the MPS, the steeper is the IS curve. For a given fall in the interest rate, the amount by which income would have to be increased to restore equilibrium in the product market is smaller (larger), the higher (lower) the MPS.

## What causes the IS curve to shift?

**Any change (decrease in government consumption, increase in taxes, decrease in consumer confidence – proxied by c0) that, for a given interest rate, decreases the demand for goods**creates a shift of the IS curve to the left.

## Why is IS curve downward sloping?

**When the interest rate falls, investment demand increases, and this increase causes a multiplier effect on consumption, so national income and product rises**.

## IS curve a diagram?

**45° line diagram**.

## IS curve a slope formula?

**f/(x)**. Recall that we already know the slope of a line g(x) = mx + b is this means that the derivative of the line is g/(x) = .

## IS curve a variable?

**the independent variable is the interest rate and the dependent variable is the level of income**.

## On what factors slope of IS curve depends?

**the elasticity of the investment demand curve, and (2) the size of the multiplier**. The elasticity of investment demand signifies the degree of responsiveness of investment spending to the changes in the rate of interest.

## IS curve a parameter?

**A curve in the (x,y) plane can be represented parametrically**. The equations that are used to define the curve are called parametric equations.

## IS curve a note?

## IS and LM curve equation?

**r = (1/L**. r = (1/L

_{2}) [L_{0}+ L_{1}Y – M/P]_{2}) [L

_{0}+ L

_{1}m(e

_{0}-e

_{1}r) – M/P].

## IS and LM analysis?

## What is the shape of LM curve?

**upward sloping**: given the money supply and the bond supply, an increase in the national income and product raises the interest rate.

## Why is indifference curve convex?

**because of decreasing MRS (Marginal rate of substitution)**. The curve represents the marginal rate of substitution. Hence, option (a) is correct.

## What are the five properties of indifference curve?

**Characteristics of Indifference Curves**

- Indifference curves slop downward to the right. …
- Every indifference curve to the right represents a higher level of satisfaction. …
- Indifference curves cannot intersect each other. …
- Indifference curve will not touch the axis. …
- Indifference curves are convex to the origin.