KESEIMBANGAN IS-LM KULIAH 10

AGENDA

Keseimbangan Keseimbangan
Ekuilibrium
Pasar Barang Pasar Uang
Simultan
dan Kurva IS dan Kurva LM
 Goods and of Financial Market : The IS-LM Model

 The Goods Market and The IS Relation

Y = C (Y-T) + I + G
Investment, Sales, and The Interest Rate
I = I (Y, i)
(+, -)
Where : Y = Production
i = Interest rate
 The IS Curve
Y = C (Y-T) + I (Y, i) + G
The supply of goods (the left side) must
be equal to the demand for goods (the
right side)
 The Effects of an Increase in The Interest rate on Output

Demand, z ZZ
For interest
rate, i
A ZZ’
For interest rate
I’>i
A’

Y’ Y Output, Y
The Derivation of the IS Curve ZZ

A ZZ’

A’

Y’ Y Output, Y
Interest rate, i

A’
i’

i A

IS curve

Y’ Y Output, Y
 The Shifts in the IS Curve
Interest rate, i

IS ( For
taxes T)
IS ( for T’>T)

Y’ Y
Output, Y
 Financial Markets and The LM Relation

MS = M d
M = $ YL (i)
Variable M on The left side is the nominal
money stock
M/P = Y L (i) ………….. LM Relation
 The effects of an increase in Income on the interest rate

Interest rate, i

i’ A’

i A
M d’ (for Y’> Y)

M d (for Income Y)

M/P Real Money, M/P)

 The Derivation of The LM Curve
Interest rate, i Interest rate, i

LM

A’ A’
I’ I’

M d’ (for Y’> Y)

A i A
i
M d (for Income Y)

Y Y’
M/P (Real Money, M/P)
Income, Y
 Shifts in The LM Curve

LM (for M/P)
Interest rate, i

LM ‘ (for M’/P > M/P)

An Increase in Money

i’

Y
Income, Y
The IS-LM Model : Exercises

IS Relation Y = C(Y-T)+I(Y, i) + G
LM Relation M/P = Y L( i )
 The IS-LM Model
Interest rate, i
Equilibrium in Financial Market (LM)

i Equilibrium in Goods Market (IS)

Y Income, Y
Monetary and Fiscal Policy : an Example
Consider the following IS-LM Model :
C = 200 + 0.25 YD
I = 150 + 0.25 Y – 1000 I
G = 250
T = 200
(M/P) d = 2Y- 8000 i
M/P = 1,600
1. Derive the equation for the IS curve
2. Derive the equation for LM curve
3. Solve for equilibrium real output
4. Solve equilibrium interest rate
5. Solve for equilibrium values of C and I
6. Now Suppose that the money supply increases to M/P =
1840. Solve Y, i, C and explain in words the effects of
expansionary monetary policy
7. Set M/P equal its initial value of 1600, Now suppose that
government spending increase to G = 400. Summarize the
effects of expansionary fiscal policy on Y, i and C. and why
if government spending decrease to G = 100