Answer to Question #212225 in Macroeconomics for BONGIWE

Question

Which of the following statements is/are correct?a.The IS curve represents the combinations of the level of output and income and the interest rate where the financial market is in equilibrium.b.The IS curve represents the combinations of the level of output and income and the interest rate where the goods market is in equilibrium. c.To derive the IS curve, we change the level of output and income to determine the effect on the interest rate.d. In deriving the IS curve, we assume that an increase in interest rate decreases the level of investment spending, shifts the ZZ curve downwards,and reduces the level of output and income

Answer 1

b.The IS curve represents the combinations of the level of output and income and the interest rate where the goods market is in equilibrium

c.To derive the IS curve, we change the level of output and income to determine the effect on the interest rate