In this article we will discuss about the derivation and properties of IS and LM curve, explained with the help of suitable diagrams. The goods market equilibrium schedule is the IS curve (schedule). It shows combination of interest rates and levels of output such that planned (desired) spending (expenditure) equals income. The goods-market equilibrium schedule is a simple extension of [...]
LM-Curve: Derivation, Factors, Situations, Interpretation! Money Market Equilibrium: The LM Curve: The Derivation of the LM Curve: The Keynesian demand function for money is expressed as Here c0 is the intercept of the money demand function, c1 is the increase in money demand per unit increase in Y, and c2 is fall in money demand per unit increase in r. [...]
Let us make an in-depth study of the Stability of the General Equilibrium. An equilibrium is said to be a stable one when economic forces tend to push the market towards it. The following diagram (Fig. 14.7) shows that the general equilibrium of the economy which we have derived above is indeed a stable one. To show this consider all [...]