IS-LM Model

The IS-LM model is an economic tool that shows how different factors influence a country's overall economy. The IS curve represents the relationship between total spending (investment and consumption) and interest rates, indicating where goods markets are in equilibrium. The LM curve reflects the demand for and supply of money, showing how interest rates balance money availability with spending. Together, their intersection indicates the equilibrium level of economic activity and interest rates, helping economists understand how changes in monetary policy, fiscal policy, or other factors can influence economic growth, inflation, and unemployment.