The IS curve illustrates all combinations of domestic output levels and interest

Question

The IS curve illustrates all combinations of domestic output levels and interest rates for which: the domestic product market is in equilibrium. the domestic money market is in equilibrium. there is a zero balance in the country's official settlements balance. there is full employment. QUESTION 6 The LM curve illustrates all combinations of domestic output levels and interest rates for which: the domestic product market is in equilibrium the domestic money market is in equilibrium. there is a zero balance for the country's official settlements balance. there is full employment. QUESTION 7 The intersection of the IS and LM curves shows: the balance of payments deficit or surplus the short-run equilibrium interest rate and the output level in the economy. the long-run equilibrium inflation rate and the natural rate of unemployment in the economy.

Explanation / Answer

IS curve- the domestic product market is in equilibrium.

LM curve - the domestic money market is in equilibrium.

intersection - the short-run equilibrium interest rate and the output level in the economy.

(IS curve explains equilibrium in goods market in an economy, LM explains equilibrium in money market in an economy and their intersection determines the level of interest rate and output for which both goods and money market is in equilibrium simultaneously.)

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