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Unit-18: IS - LM Analysis
Notes
Figure 18.11
Self Assessment
State whether the following sentences are True or False:
7. We establish the relationship between money demand and interest rate.
8. The changes in actual GDP impact on the demand of money.
9. The demand of money rises on rise in GDP.
10. There becomes no change in demand of money and interest rate because of change in
GDP.
18.3 Summary
y Current chapter explains how the IS and LM Curves are derived and how the balanced actual
GDP and interest rate are determined. Besides it we also derive the Aggregate Demand Curve
from IS-LM Analysis and will concentrate on the thing that how the shift in IS or LM brings
the shift in Aggregate Demand Curve.
18.4 Keywords
y Derivation – origin and growth.
y Equilibrium – Communize, Balance.
18.5 Review Questions
1. Describe the IS Curve and it’s Derivation.
2. Define the LM Curve and it’s Derivation.
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