Economic Problems, Which Can Be Explained By the IS-LM ModelStudent’s NameCourse Title,Instructor’s Name,DateThe IS-LM model
Surname 2Economic Problems, Which Can Be Explained By the IS-LM ModelThe IS/LM model was established in 1937 by John R. Hicks in Oxford at an econometric conference. The model represents a macroeconomic method that explains the correlation between interest rates and the aggregate output. The model is involved to describe the relationship in the goods and the money market. The IS curve represents the investment/saving while the LM curves represent the liquidity preference. The intersection of the curves represents a simultaneous equilibrium in both markets. The model describes why the aggregate demand shifts and change that occurs in the national income at fixed price level (McKinnon 2014, 234). The model also provides appropriate approaches used to stabilize the economy. This paper identifies current problems facing the United States and uses the IS/LM model to provide potential stabilization policies.Problems facing the United States The U.S is experiencing various government, economy, unemployment, and immigration problems. The United States has experienced sharp rate of unemployment for the last decade.