Re: ISI 2005 - IS LM Query

Posted by Dheeraj on Apr 05, 2014; 9:55am
URL: http://discussion-forum.276.s1.nabble.com/ISI-2005-IS-LM-Query-tp7584178p7586137.html

But I think there is no interest rate in IS equation i.e. IS equation is independent of interest rate because INvestment is exogenous at Io.
  Here IS equation is:  Y= (a + Io + Go)/(1-b) i.e. IS curve is vertical implying that at every interest rate Y is constant.

    and LM equation is an upward sloping curve. With increase in price level, real money supply decreases, which shifts LM curve upward. With this interest rate increases and real GDP remains same.