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IS-LM Equilibrium

overall equilibrium - maintains equilibrium in both goods/money markets  

  • shift in IS or LM curves >> new equilibrium
  • solve for Y in IS, LM relations
    • set equations equal to each other to find IS-LM equilibrium
  • cannot use interest rates to shift curves
    • interest rates = result of interaction between goods/money market


  • LM curve
  • IS curve
  • equilibrium between goods and money markets
  • LM, IS curves just explain both markets in terms of interest and output
Subject X2: 

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