IS-LM Model

Question 1

IS Curve definition:

Answer 1

A schedule of all combinations of r and Y that results in goods market equilibrium. It can be derived from the Keynesian Cross.

Question 2

LM Curve definition:

Answer 2

A schedule that gives us all the combinations of Y and r that ensure the equilibrium in the money market. It can be derived from the money market equilibrium.

Question 3

Equilibrium of the IS-LM curves

Answer 3

The point where both the goods and the money market are in equilibrium