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  1. The IS–LM model, or HicksHansen model, is a two-dimensional macroeconomic model which is used as a pedagogical tool in macroeconomic teaching. The IS–LM model shows the relationship between interest rates and output in the short run in a closed economy.

  2. Apr 15, 2024 · The IS-LM model, which stands for “investment-saving” (IS) and “liquidity preference-money supply” (LM), is a Keynesian macroeconomic model that shows how the market for economic...

  3. The IS-LM model modified for endogenous money: The central bank controls interest rates but not the money supply. The LM curve is now flat, since, when the money supply increases, the interest rate r does not move. Income Y increases from ya to yb without any rise in interest rates

  4. Aug 16, 2017 · The IS-LM model stands for "Investment / Savings Equilibrium" and "Liquidity Demand / Money Supply Equilibrium." These are two different curves, as we will see in moment, that represent a relationship between the goods market and the financial market.

  5. LM represents the price (in interest rate) that entrepreneurs are willing to pay in order to acquire capital to invest in a project. As the economy improves, there is more of a reason to engage in new entrepreneurial activities, so ceteris paribus they would be willing to pay more then.

    • 8 min
    • Sal Khan
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