econ 2123 is-lm model

7/17/2019 ECON 2123 IS-LM Model

http://slidepdf.com/reader/full/econ-2123-is-lm-model 1/14

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e D e r i v a t i o n o f t h e I S C u r v e

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l e f t .

S h i f t s o f t h e I S C u r v e

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E q u i l i b r i u m i n t h e g o o d

s m a r k e t i m p l i e s

t h a t a n i n c r e a s e i n t h e

i n t e r e s t r a t e l e a d s

t o a d e c r e a s e i n o u t p u t . T h i s i s

r e p r e s e n t e d b y t h e I S c u r v e .


i n f i n a n c i a l m a r k e t s i m p l i e s t h a t a n

i n c r e a s e i n o u t p u t l e a d

s t o a n i n c r e a s e i n

t h e i n t e r e s t r a t e .

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t h e L M c u r v e .

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b o

t h g o o

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d

f i n a n c

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t s i n e

q u

i l i b r i u m .

T h e I S – L M M o d e l

F i g u r e 5 - 6

I S r e l a t i o n : Y

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+ B 3 + 1 / ) ]

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7 = B . B C / @ / A B \ B ↓

+ B 3 + 1 / ) ]

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! > ?

+ 0 3 2 . 0

4 *

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0 \ ) ↓

+ B 3 + 1 / B ]

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4 *

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+ B 3 + 1 / B ]

> E

A n i n c r e a s e i n t a x e s s h i f t s t h e I S c u r v e t o t h e l e f t a n

d …

T h e E f f e c t s o f a n I n c r e a s e i n T a x e s

F i g u r e 5 - 7

> I

2 % & = 3 ( = * 4 ! - 3 = ! % * 4 < C ! "

# D ↓

T h e E f f e c t s o f a n I n c r e a s e i n T a x e s

F i g u r e 5 - 7

> J

2 % & = 3 ( = * 4 ! - 3 = ! % * 4 < C ! "

# D ↓

A n i n c r e a s e i n t a x e s s h i f t s t h e I S c u r v e t o t h e l e f t a n

d l e a d s t o a d e c r e a s e i n t h e

e q u i l i b r i u m l e v e l o f o u t p u t a n d t h e e q u i l i b r i u m i n t e r e

s t r a t e .

! ↑

# $ % & ' ( ) % ' *

+ ↓ ,

* - ' ↓

# .

I n t h e s h o r t r u n , a

r e d u c t i o n o f t h e

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econ 2123 is-lm model

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