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    Macroeconomic Interest Rates Investment Saving Liquidity Preference Money Supply National Income Aggregate Demand Curve

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    Mzee Kodia
    The IS–LM model, or Hicks–Hansen model, is a macroeconomic tool that demonstrates the relationship between interest rates and real output, in the goods and services market and the money market (also known as the assets market). The intersection of the "investment–saving" (IS) and "liquidity preference–money supply" (LM) curves is the "general equilibrium" where there is simultaneous equilibrium in both markets.[1] Two equivalent interpretations are possible: first, the IS–LM model explains changes in national income when the price level is fixed in the short-run; second, the IS–LM model shows why the aggregate demand curve shifts.[2] Hence, this tool is sometimes used not only to analyse the fluctuations of the economy but also to find appropriate stabilisation policies.[3] The model was developed by John Hicks in 1937,[4] and later extended by Alvin Hansen,[5] as a mathematical representation of Keynesian macroeconomic theory. Between the 1940s and mid-1970s, it was the leading framework of macroeconomic analysis.[6] While it has been largely absent from macroeconomic research ever since, it is still the backbone of many introductory macroeconomics textbooks.[7]

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    Macroeconomic Interest Rates Investment Saving Liquidity Preference Money Supply National Income Aggregate Demand Curve

    Uploaded by

    Mzee Kodia
    3 views1 page
    The IS–LM model, or Hicks–Hansen model, is a macroeconomic tool that demonstrates the relationship between interest rates and real output, in the goods and services market and the money market (also known as the assets market). The intersection of the "investment–saving" (IS) and "liquidity preference–money supply" (LM) curves is the "general equilibrium" where there is simultaneous equilibrium in both markets.[1] Two equivalent interpretations are possible: first, the IS–LM model explains changes in national income when the price level is fixed in the short-run; second, the IS–LM model shows why the aggregate demand curve shifts.[2] Hence, this tool is sometimes used not only to analyse the fluctuations of the economy but also to find appropriate stabilisation policies.[3] The model was developed by John Hicks in 1937,[4] and later extended by Alvin Hansen,[5] as a mathematical representation of Keynesian macroeconomic theory. Between the 1940s and mid-1970s, it was the leading framework of macroeconomic analysis.[6] While it has been largely absent from macroeconomic research ever since, it is still the backbone of many introductory macroeconomics textbooks.[7]

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    The IS–LM model, or Hicks–Hansen model, is a macroeconomic tool that demonstrates the relationship between interest rates and real output, in the goods and services market and the money market (also known as the assets market). The intersection of the "investment–saving" (IS) and "liquidity preference–money supply" (LM) curves is the "general equilibrium" where there is simultaneous equilibrium in both markets.[1] Two equivalent interpretations are possible: first, the IS–LM model explains changes in national income when the price level is fixed in the short-run; second, the IS–LM model shows why the aggregate demand curve shifts.[2] Hence, this tool is sometimes used not only to analyse the fluctuations of the economy but also to find appropriate stabilisation policies.[3] The model was developed by John Hicks in 1937,[4] and later extended by Alvin Hansen,[5] as a mathematical representation of Keynesian macroeconomic theory. Between the 1940s and mid-1970s, it was the leading framework of macroeconomic analysis.[6] While it has been largely absent from macroeconomic research ever since, it is still the backbone of many introductory macroeconomics textbooks.[7]

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    © All Rights Reserved
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    Download as doc, pdf, or txt
    3 views1 page

    Macroeconomic Interest Rates Investment Saving Liquidity Preference Money Supply National Income Aggregate Demand Curve

    Uploaded by

    Mzee Kodia
    The IS–LM model, or Hicks–Hansen model, is a macroeconomic tool that demonstrates the relationship between interest rates and real output, in the goods and services market and the money market (also known as the assets market). The intersection of the "investment–saving" (IS) and "liquidity preference–money supply" (LM) curves is the "general equilibrium" where there is simultaneous equilibrium in both markets.[1] Two equivalent interpretations are possible: first, the IS–LM model explains changes in national income when the price level is fixed in the short-run; second, the IS–LM model shows why the aggregate demand curve shifts.[2] Hence, this tool is sometimes used not only to analyse the fluctuations of the economy but also to find appropriate stabilisation policies.[3] The model was developed by John Hicks in 1937,[4] and later extended by Alvin Hansen,[5] as a mathematical representation of Keynesian macroeconomic theory. Between the 1940s and mid-1970s, it was the leading framework of macroeconomic analysis.[6] While it has been largely absent from macroeconomic research ever since, it is still the backbone of many introductory macroeconomics textbooks.[7]

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    The ISLM model, or HicksHansen model, is a macroeconomic tool that demonstrates the

    relationship between interest rates and real output, in the goods and services market and the
    money market (also known as the assets market). The intersection of the "investmentsaving"
    (IS) and "liquidity preferencemoney supply" (LM) curves is the "general equilibrium" where
    there is simultaneous equilibrium in both markets.[1] Two equivalent interpretations are possible:
    first, the ISLM model explains changes in national income when the price level is fixed in the
    short-run; second, the ISLM model shows why the aggregate demand curve shifts.[2] Hence, this
    tool is sometimes used not only to analyse the fluctuations of the economy but also to find
    appropriate stabilisation policies.[3]
    The model was developed by John Hicks in 1937,[4] and later extended by Alvin Hansen,[5] as a
    mathematical representation of Keynesian macroeconomic theory. Between the 1940s and mid1970s, it was the leading framework of macroeconomic analysis.[6] While it has been largely
    absent from macroeconomic research ever since, it is still the backbone of many introductory
    macroeconomics textbooks.[7]

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