Fiscal Policy: Government spending or tax cuts increase aggregate demand, shifting the IS curve to the right. Reduced spending or higher taxes shift it left.
Marginal Propensity to Consume (MPC): The slope of the IS curve depends on how much households spend from additional income. Higher MPC makes the IS curve steeper, as income changes more significantly affect demand.
Investment Sensitivity to Interest Rates: If investment is highly responsive to interest rates, a small rate change leads to a significant investment change, making the IS curve flatter. Less responsive investment makes it steeper.
Consumer and Business Confidence: Higher confidence boosts spending and investment, shifting the IS curve to the right. Low confidence reduces demand, shifting it left.
Net Exports: Increased exports or decreased imports raise aggregate demand, shifting the IS curve to the right. Changes in exchange rates also influence this factor.
