ECN 302-602 (5), The IS-LM Model

ECN 302-602 (5), The IS-LM Model - Chapter 4 -The IS-LM...

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Chapter 4 -- The IS-LM Model Fundamental inflexibility assumptions: W -- inflexible P -- inflexible i -- flexible Overriding theme -- The interest rate changes as a result of monetary policy (money supply) as well as other factors.
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The IS Curve Re-translation of Simple Keynesian model at equilibrium (Investment = Saving). A plot of equilibrium output for various interest rates within the market for goods and services.
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Properties of the IS Curve Downward sloping, i C , I Y* Shift variables consist of the shift variables of the E P curve, except for the nominal interest rate (i). Increases in autonomous expenditure which shift the E P curve upward , simultaneously shift
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Decreases in autonomous expenditure which shift the E P curve downward , simultaneously shift the IS curve leftward . The steepness or flatness of the IS curve describes the elasticity or responsiveness of C and I to the nominal interest rate. --
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This note was uploaded on 08/09/2009 for the course ECN 302 taught by Professor Staff during the Summer '08 term at Syracuse.

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ECN 302-602 (5), The IS-LM Model - Chapter 4 -The IS-LM...

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