 In summary, the IS curve shows the causation from interest rates to planned fixed investment to rising national income and output.The IS curve is defined by the equation
where "Y" represents income, formula_2 represents consumer spending increasing as a function of disposable income (income, "Y", minus taxes, "T"("Y"), which themselves depend positively on income), formula_3 represents business investment decreasing as a function of the real interest rate, "G" represents government spending, and "NX"("Y") represents net exports (exports minus imports) decreasing as a function of income (decreasing because imports are an increasing function of income).The LM curve shows the combinations of interest rates and levels of real income for which the money market is in equilibrium.