Question

Why does the IS curve show an inverse relationship between rate of interest and income leve. A)income grows automatically B)consumption is a function of income C ) saving equals investment D)Investment responds negatively to rate o interest​

Answer 1

Answer:

Thus, the IS curve shows the combinations of interest rates and income levels such that the goods market is in equilibrium. The IS curve is negatively sloped because when the interest rate decreases, the planned investment increases, which in turn increases the AD and thus, the equilibrium income level increases.

Answer 2

Answer:

Option (A) : income grows automatically

Explanation:

What is the impact of an increase in taxes on the interest rate, income, consumption, and investment? Increase in taxes cause income to fall by multiplier. Interest rate falls to new equilibrium