« A Simple IS/MP Model | Main | Aggregate Demand and Supply - The Keynesian Perspective »

May 24, 2006

The IS/LM Model

Assume that prices are fixed.

Derive the IS curve:

P5240103a.jpg

Derive the LM curve:

P5240106a.jpg

Put them together:

P5240108a.jpg


Fiscal policy shifts the IS curve:

P5240109a.jpg

Monetary policy shifts the LM curve:

P5240111a.jpg

And,

P5240114a.jpg


Posted by bparke at May 24, 2006 10:51 PM

Comments