Macro 4
LM - IS model
LM - IS model
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Kartei Details
| Karten | 11 |
|---|---|
| Sprache | English |
| Kategorie | VWL |
| Stufe | Universität |
| Erstellt / Aktualisiert | 23.05.2013 / 30.05.2013 |
| Lizenzierung | Kein Urheberrechtsschutz (CC0) |
| Weblink |
https://card2brain.ch/box/macro_4
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IS relation
Y must be equal to Z
production is equal to demand
2 characteristics of ZZ curve
- We have assumed that consumption and investment relations are not linear
- ZZ is flatter than 45-degree line because we assume that an increase in output leads to a less than one-for-one increase in demand.
IS curve
- An increase in the interest rate decreases the demand for goods at any level of output, leading to a decrease in the equilibrium level of output.
- Equilibrium in the goods market implies that an increase in the interest rate leads to a decrease in output. The IS curve is therefore downward sloping.
IS curve - ZZ relation
shift of ZZ curve ⇒ movement on IS-curve
movement on ZZ curve ⇒ shift of IS-curve
