IS curve

The IS Curve

What you need to know about the IS curve:
(a) The meaning of the IS curve and how it is derived;
(b) What determines the slope of the IS curve; and
(c) What determines the position of the IS curve.

The meaning of the IS curve and how it is derived The IS curve shows us the interest rate and income combinations that gives equilibrium in the goods market.

Equilibrium in the goods market occurs when planned expenditure equals income or output. Remember that in Keynesian economics, total spending is the key to determining the output in the economy.