Aggregate Demand II:Aggregate Demand II:Applying the Applying the ISIS-LMLMModelModelChapter 11ContextChapter 9 introduced the model of aggregate demand and supply. Chapter 10 developed the IS-LMmodel, the basis of the aggregate demand curve.The intersection determines the unique combination of Yand rthat satisfies equilibrium in both markets.The LMcurve represents money market equilibrium.Equilibrium in the IS-LMmodelThe IScurve represents equilibrium in the goods market.()( )YC YTI rG( ,)M PL r YISYrLMr1Y1
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