IS–LM

Steven N. Durlauf and Donald D. Hester
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
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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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How to cite this article

Durlauf, Steven N. and Donald D. Hester. "IS–LM." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 20 August 2014 <http://www.dictionaryofeconomics.com/article?id=pde2008_I000303> doi:10.1057/9780230226203.0855

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