Abstract
The IS–LM model is a short-run macroeconomic analytical construct for studying an economy with idle productive resources. The diagram has been especially influential because its constituent curves are loci on which the goods market (IS curve) and the money market (LM curve) are respectively in equilibrium, making it possible to infer changes in fiscal policy and monetary policy, both separate and simultaneous. The model is prominent in elementary and intermediate macroeconomic textbooks, yet it fails to accommodate the main features of modern macroeconomic theory, although modern dynamic models are sometimes interpreted as having IS–LM type features.
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Durlauf, S.N., Hester, D.D. (2018). IS–LM. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2378
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2378
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