Steps for drawing the IS curve

Steps for drawing the IS curve:

At the initial interest rate of ro, investment is Io and the planned expenditure line corresponding to this level of interest rate and investment is Eo. With planned expenditure represented by Eo(ro), equilibrium in the goods market is attained at output level Yo. As interest rate falls to r1, investment increases to I1. This in turn increases planned expenditure to E1 resulting in a higher new equilibrium level of output, Y1.

Conclusion:
A decline in interest rate results in a new equilibrium at a higher level of output. Interest rate and output are inversely related, therefore the IS curve which shows the relationship between interest rate and the equilibrium output is negatively sloped.