IS curve is the trajectory of all the combination points in the product market that meet the equilibrium income and interest rate. The slope of IS curve mainly depends on the sensitivity of investment to interest rate and the size of multiplier. The greater the elasticity of investment to interest rate, the flatter the IS curve. The larger the multiplier, the flatter the curve. The shift of IS curve IS caused by the change of spontaneous expenditure, and the increase of spontaneous expenditure will shift IS curve to the right.

The decline of spontaneous expenditure will lead to the left shift of IS curve. The points on the upper right of the Is curve indicate that the product market Is oversupplied, while the points on the lower left of the IS curve indicate that the product market is oversupplied. Only the points on the IS curve can meet the requirement of equal total supply and total demand in the product market.

Extended data

When the product market reaches equilibrium, the locus of points of various income and interest rate combinations. Where I stands for investment and S stands for savings. In the two-sector economy, the mathematical expression of IS curve IS I(R)=S(Y), and its slope is negative, which indicates that IS curve is generally inclined to the lower right.

Generally speaking, in the product market, the combination of income and interest rate on the right side of the IS curve is an unbalanced combination of investment less than savings; The combination of income and interest rate on the left side of IS curve is an unbalanced combination of investment greater than savings. Only the combination of income and interest rate on the IS curve is the balanced combination of investment and savings.

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