• The IS-LM Curve is between GDP and interest rates

• The IS-LM Model generates equilibrium between Interest rates and Gdp

• The IS curve is derived from the goods market

• The LM curve is derived from the money market

Relation Between Interest Rates And Gdp

• Changes in interest rates can affect the GDP, lets see the different possibilities of changes in the GDP when there is changes in the interest rates

• High Interest Rates ---> Low GDP, this occurs because higher interest rates influences low income and borrowing, this concludes to less production and sales

• Low Interest Rates ---> High GDP, Higher GDP is a threat to higher deficit, if there is higher GDP, more production and lower interest rates encourages for more purchases, this increases demand and prices raise, this decreases exports and increase imports, decreasing currency value and increase current account deficit

• Attaining equilibrium is the best possible way to run a economy as balanced interest rates and GDP can stop problems of lower production, less sales and higher GDP and deficit