IS Curve

Question 1

IS stands for?

Answer 1

investment-savings

Question 2

depicts the set of all levels of interest rates and output (GDP) at which total investment (I) equals total saving (S)

Answer 2

IS curve

Question 3

At lower interest rates___

Answer 3

investment is higher

Question 4

At lower interest rates, investment is higher____

Answer 4

translates into more total output (GDP)

Question 5

At lower interest rates, investment is higher, which translates into more total output (GDP)

Answer 5

IS curve slopes downward and to the right.

Question 6

IS curve displays the equilibrium in

Answer 6

the goods and service market for various interest rates.

Question 7

degree to which firms adjust investment spending relative to the interest rate is called

Answer 7

interest sensitivity

Question 8

A fall in the interest rate leads

Answer 8

an expansion of investment

Question 9

Aggregate expenditure is equal to

Answer 9

C+I+G

Question 10

Aggregate expenditures would increase and the level of output ______

Answer 10

would also increase

Question 11

Lower levels of interest rates have generated

Answer 11

high level of investments and and high level of output

Question 12

How is investment spending related to interest rate

Answer 12

Negatively related

Question 13

The goods market

Answer 13

IS Curve

Question 14

Financial market

Answer 14

LM curve

Question 15

Equilibrium

Answer 15

IS-LM

Question 16

IS Curve formula

Answer 16

Y = C (Y- T) + I (Y, i) + G

Question 17

If taxes increase____

Answer 17

Disposable income drops, consumption drops, demand drops,
For any level of interest rate, the corresponding level of equilibrium output is now lower,
leftward shift of the IS curve.

Question 18

(decrease in government consumption, increase in

taxes, decrease in consumer confidence___

Answer 18

for a given interest rate, decreases the demand for goods creates a shift
of the IS curve to the left.

Question 19

higher sensitivity means

Answer 19

a drastic increase in investment spending in reaction to a relatively small reduction in the interest rate

Question 20

The connection between spending and real GDP comes from

Answer 20

the aggregate expenditure model

Question 21

Given a particular level of the interest rate, the aggregate expenditure model determines

Answer 21

the level of real GDP.

Question 22

Now suppose the interest rate increases, what happens in the aggregate expenditure model

Answer 22

a reduction in autonomous spending decrease in real GDP

Question 23

If there is a decrease in investment or spending, what happens to the equilibrium?

Answer 23

equilibrium level of output decreases. Thus the IS curve slopes downwards

Question 24

higher interest rates are associated with

Answer 24

lower real GDP

Question 25

If there is lower interest rate, what happens to Investment, Demand, Output and Consumption

Answer 25

As interest rate decreases, Investment, Demand, Output and Consumption INCREASES

Question 26

factor that increases the demand for goods and services will shift the IS curve.

Answer 26

up and to the right

Question 27

IS equation

Answer 27

=C (Y-T) + I(r) + G + NX

Question 28

an increase in taxes shifts toe IS curve

Answer 28

to the left

Question 29

What causes the IS curve to shift to the right

Answer 29

Government spending increases, if autonomous spending increases, investment increases or taxes falls.

Question 30

Investment formula

Answer 30

negative relationship between Investment and Interest Rate(i)

Question 31

Demand formula

Answer 31

AE= C + I +G

Question 32

Output

Answer 32

Y = AE

Question 33

Consumption Function

Answer 33

C = Cnot (autonomous) + bY

Question 34

There is a _______ relationship between output and investment

Answer 34

Direct [I=f(i, Y)]