The IS curve has a: negative slope because a higher interest rate leads to a dec

Question

The IS curve has a: negative slope because a higher interest rate leads to a decrease in government spending, which reduces the domestic output level negative slope because a higher interest rate leads to a decrease in aggregate demand, which results in lowering of the domestic production level. positive slope because a higher interest rate leads to an increase in aggregate savings and thus an increase in domestic real investment. positive slope because a higher interest rate leads to an increase in foreign investment and thus raises the level of aggregate income. QUESTION 4 If C represents aggregate consumption, ld represents domestic investments, G represents government expenditures, E represents national expenditures on goods and services, X represents foreign demands for exports, and M represents domestic demand for imports, then aggregate demand in an economy equals: C+ld+G+(X- M) E+C ldX-M). C+1d + G+ (M-X). C +ld+ G.

Explanation / Answer

a) The IS curve has a negative slope because the higher the interest rate the lower the spending will be. People will like to save money and delay their consumption. The answer is "B".

b) "A", Aggregate demand is consumption + Investment + government expenditure + net export (export-import. )

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