A point below the IS curve corresponds toGroup of answer choicesexcess demand in the goods marketexcess supply in the goods marketexcess supply in the financial marketexcess demand in the financial market
Question
A point below the IS curve corresponds toGroup of answer choicesexcess demand in the goods marketexcess supply in the goods marketexcess supply in the financial marketexcess demand in the financial market
Solution
A point below the IS curve corresponds to excess supply in the goods market.
Here's why:
The IS curve represents all combinations of the interest rate and level of income where the goods market is in equilibrium (i.e., where investment equals savings).
If we are at a point below the IS curve, this means that for a given interest rate, the level of income is lower than what would be required for the goods market to be in equilibrium.
In this situation, firms are producing less goods than what people want to buy at current prices (i.e., there is less investment than savings). This is the definition of an excess supply in the goods market: the quantity supplied exceeds the quantity demanded.
Similar Questions
The demand curve corresponds to:
The position of these five curves in relation to one another reflects:Multiple Choicethe law of opportunity coststhe law of constant coststhe effect of fixed costs upon AC as output increasesthe law of demandincreasing and decreasing returns to scale
The IS curve is the locus of (Y, r) points where the:government budget is in deficit.goods and the money market are in equilibrium.money market is in equilibrium.goods market is in equilibrium.
The market supply curve: Group of answer choicesis the horizontal summation of individual firm’s ATC curves.is the summation of the individual firm’s AVC curves for every level of output.is the prices firms choose to sell in a competitive market.is the horizontal summation of individual firm supply curves.None of the answers in this list apply.
For a firm in a perfectly competitive industry, the demand curve for its own product is _________.Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.averticalbdownward slopingcthe same as the marginal cost curvedhorizontal at the market price
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.