Q. Explain the basic characteristics of IS-curve?

IS-LM diagram

IS-curve

The goods market is in equilibrium when Y_D(Y, R) = Y. Note that when R is given, IS-LM simplifies to cross model: 

Figure

If we know R, we can figure out the equilibrium value of Y using the cross model. Additionally, if we know Y we can conclude R from the money market. None of the methods, though, will gives us both Y and R simultaneously. 

Consider the following question: What should happen to Y when we change R if we want the goods market to remain in equilibrium? To answer this question, consider two different interest rates R₁ = 5% and R₂ = 10%. As YD relies negatively on R, Y_D(Y, R₁) would be larger than Y_D(Y, R2). With a higher R, we should have a lower Y for the goods market to be in equilibrium.