Which curve shows the good market equilibrium
Answers
Explanation:
The IS-LM curve model emphasises the interaction between the goods and money markets. The goods market is in equilibrium when aggregate demand is equal to income. The aggregate demand is determined by consumption demand and investment demand.
Answer: The IS-LM curve model shows the goods market equilibrium. It also shows the interaction between the goods markets and money markets.
Explanation:
1. The goods market is at the equilibrium point when aggregate demand becomes equal to the income.
2. The aggregate demand is always determined by the consumption demand and the investment demand.
3. According to the Keynesian model of goods market equilibrium we can get to see the rate of interest as an important determinant of investment demand.
4. The IS curve is related to different equilibrium level points of national income with various number rates of interest.
5. With the decline in the rate of interest, the planned investment demand will be higher which will further cause a shift upward in aggregate demand function (i.e. C + I) concluding in goods market equilibrium at an increasing level of national income.