IS-LM model: IS curve as an events chain
Channel: econom
Date: 2015-11-24

An increase in the interest rate decreases investment spending since investment spending is negative function of the interest rate. A decrease in investment leads to a decrease in the demand for goods, and through the multiplier effect, the level of output and income decreases. As the demand for goods and output decreases, both consumption spending and investment spending decrease, and the multiplier process comes into operation.