IS-LM Model
The IS-LM model is an economic model that describes the relationship between the interest rate and the level of output in an economy. It is used to explain how the economy adjusts to changes in the money supply, the price level, and the level of government spending. The model was developed by John Hicks in 1937 and is based on the work of John Maynard Keynes. The IS-LM model is a macroeconomic tool that is used to analyze the short-run equilibrium of the economy. It is used to explain how changes in the money supply, the price level, and the level of government spending affect the level of output and the interest rate.
History of the IS-LM Model
The IS-LM model was developed by John Hicks in 1937 as a way to explain the relationship between the interest rate and the level of output in an economy. The model was based on the work of John Maynard Keynes, who developed the General Theory of Employment, Interest, and Money in 1936. The IS-LM model is a macroeconomic tool that is used to analyze the short-run equilibrium of the economy. It is used to explain how changes in the money supply, the price level, and the level of government spending affect the level of output and the interest rate.
Comparison Table
| Variable | IS Curve | LM Curve |
|---|---|---|
| Interest Rate | Inversely related | Directly related |
| Output | Directly related | Inversely related |
| Money Supply | Inversely related | Directly related |
| Price Level | Inversely related | Directly related |
| Government Spending | Directly related | Inversely related |
Summary
The IS-LM model is an economic model that describes the relationship between the interest rate and the level of output in an economy. It is used to explain how the economy adjusts to changes in the money supply, the price level, and the level of government spending. The model was developed by John Hicks in 1937 and is based on the work of John Maynard Keynes. The IS-LM model is a macroeconomic tool that is used to analyze the short-run equilibrium of the economy. For more information about the IS-LM model, you can visit websites such as Investopedia, The Balance, and Khan Academy.
See Also
- Keynesian Economics
- Aggregate Demand
- Aggregate Supply
- Monetary Policy
- Fiscal Policy
- Inflation
- Deflation
- Gross Domestic Product
- Business Cycle
- Phillips Curve
