Theory-Based Models
Theory-Based Models
Theory-Based Models
Simultaneous equilibrium in the goods market and money market, tracing how spending and liquidity conditions jointly pin down output and the interest rate.
Theory-Based Models
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Scenario
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Higher autonomous spending shifts IS to the right.
A tighter money market shifts LM upward.
Current equilibrium
Output
96.0
Interest rate
3.72
IS intercept
11.4
LM intercept
1.8
Impact summary
The current setup pushes the IS-LM intersection to output 96.0 and an interest rate of 3.72.
A softer demand position holds the goods-market schedule further left and restrains output.