190 17-7 Understanding the IS curve's slope Equilibrium in the goods market implies that an increase in the interest rate leads to a decrease in output.The IS curve is downward sloping. The Is curve is negatively sloped. ·Intuition: A fall in the interest rate motivates firms to increase investment spending,which drives up total planned spending (AE). To restore equilibrium in the goods market,output (a.k.a.actual expenditure,r)must increase. Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 17-7 Understanding the IS curve’s slope • Equilibrium in the goods market implies that an increase in the interest rate leads to a decrease in output. The IS curve is downward sloping. • The IS curve is negatively sloped. • Intuition: A fall in the interest rate motivates firms to increase investment spending, which drives up total planned spending (AE ). To restore equilibrium in the goods market, output (a.k.a. actual expenditure, Y ) must increase