ECON 410 · Intermediate Macroeconomics · Section 5 · Student Lab

Building the model in five steps

Work through the steps in order. In each one, move a slider or press a button and watch what happens.
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What this diagram shows
The Keynesian Crossplanned expenditure and income
Investment and the interest rateI(r)
The IS curveevery (Y, r) pair where the goods market clears
The money marketsupply and demand for real money balances
The LM curveevery (Y, r) pair where the money market clears
IS and LM togetherboth markets clear at one point
Aggregate demand and supplyoutput and the price level
The numbers behind the picture
Where we end up