The IS curve is the “investment-savings” curve, and one of two main curves on the macroeconomic IS-LM model. The IS-LM model is part of Keynesian economics (in vogue).
The IS-LM model has two curves: one IS (investment-savings) and one LM (liquidity preference-money supply). The IS curve is downward sloping, like a demand curve on your typical supply and demand graph, and the LM curve is upward sloping, like the supply curve on a consumer S&D graph. The y-axis is “interest rate” and the x-axis is “investment.”
The IS curve descends because the higher the interest rate, the less firms will be investing. The farther you move down (and to the right) on the IS curve, the lower interest rates are, and the higher capital spending is for firms.
But the IS curve also represents something else...well, rather, everyone else (consumers and the government). Part of this macroeconomic theory is that the firm’s “I” is also the country’s “S,” which is consumer saving plus government saving (surplus only) plus foreign saving (trade surplus). Like firms, consumers and the government are incentivized to save more and spend less when interest rates are high. Since I = S, both of these are represented by the downward-sloping IS curve.
The IS-LM model is used by macroeconomists to analyze the big picture...like trying to explain changes in aggregate demand and national income. Yep, the really big picture, all in one graph.
Related or Semi-related Video
Econ: What are National Savings?1 Views
And finance Allah shmoop What Our national savings The term
national savings refers to the total of all private and
public savings in a country All the money socked away
for you know that rainy day you get your monthly
paycheck you pay your rent you buy food and shell
up cash for your utilities your Internet service your phone
a few trips to the go kart track and maybe
buy your mom flowers for her birthday Well at the
end of the month you have twelve dollars seventeen cents
a left That goes into your savings account the same
starter savings account you first opened when you were twelve
Well that twelve dollars seventeen cents also gets counted in
the national savings total Well your twelve dollars seventeen cents
gets added to the one hundred million dollars or so
that a hedge fund manager made and paid himself for
basically pushing people's money around and taking a big fat
fee for it So he keeps that money That's his
savings And then you have all the other money saved
by people in companies and governments in the country They
all get added up All of that dough is totaled
two comprise the national savings well in practice The national
savings figure isn't calculated by adding everyone's bank accounts Jeff
Bezos Finances are much more complicated than those in York
you know junior savings account which still entitles you to
a lollypop with every deposit It might be hard to
get a firm grasp on just how much money Bezos
has saved a pay for the eventual vacation community on
the moon he plans to build with Ellen Moscow actually
may be the new one is going to be built
on Mars What do you think Well getting those savings
numbers may be difficult to get Teo because well for
Bezos and Musk most of their wealth is in stock
It hasn't been converted to cash savings so it just
sits there and it goes up with the market or
a little better than the market these days anyway Meanwhile
other people are burying cash in Mason jars in the
backyard In case you know the zombie apocalypse comes back
and all the bank's just go away or shut down
we're getting a good estimate on these totals in total
savings numbers is difficult So instead of adding up all
the savings account totals National savings is calculated a different
way Instead the figure is computed by taking the amount
of money people earn in a period when just subtracting
the amount they spend Yes very clever Well people either
spend or save their money That's the assumption here What
they didn't spend well they must have saved right Well
in terms of an equation national savings equals disposable personal
income minus personal consumption expenditures That's the big equation Well
disposable personal income represents the amount left over in people's
paychecks after they pay their taxes The amount they have
available to spend or save is you know what's left
well Meanwhile personal consumption expenditures represent the spending total The
difference between the two Well that's what's been saved when
comparing country's national savings is given as a rate like
big countries will always have a big total for savings
but it doesn't mean that they're good at saving So
to compare you need to compute a rate of savings
So for that computation to take place you take the
amount saved and calculate the ratio of that number with
the country's GDP That figure then gives you the national
savings rate Some countries save a lot Others say very
little So you know on one end of the spectrum
you've got the Singapore here It had a national savings
rate of Yes forty six point five percent of GDP
in two thousand seventeen Close toe Half of the money
earned in the country went to savings on the other
end You've got grease Hello Bankrupt Greece Yes we feel
your shame Savings rate of only ten point nine percent
in two thousand seventeen Little over ten percent of the
money earned their got saved Meaning Just under ninety percent
of it got spent as soon as it arrived Well
the U S is a lot closer to Greece Sadly
on the list it's gross National savings rate told seventeen
and a half percent in two thousand seventeen And before
you start yelling at your family at the next Thanksgiving
about how they need to save more the low savings
rate is largely the government's fault Yes White House We're
looking at you National savings includes government figures Well part
of the issue for the U S is that the
federal government runs a heavy deficit mat number that spend
leaps into the overall savings rate for the country for
the federal government ran a deficit of six hundred sixty
five billion dollars in two thousand seventeen cost us a
fortune and it had taken off a lot of our
twelve dollars seventeen cent deposits into our junior savings account
Tio you know cancel all that huge government debt out
So what We just eat it That's it National savings
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