Re: IS LM

Posted by Homer Simpson on May 02, 2014; 3:28pm
URL: http://discussion-forum.276.s1.nabble.com/IS-LM-tp7588118p7588283.html

usual AD slope is negative, observe coefficients between Y and i of the IS and LM relations. They are negative and positive respectively. So we definitely have the usual case. Substitute lamda in the IS equation.

Now either (a) or (c) should work as AD has negative slope. to find which one, simply plug in the i value from LM into the IS equation. Solve for Y and you will see its (c).