IS-LM-PC Analysis
The IS (Investment Saving), LM (Liquidity Preference- Money Supply), and PC (Philips Curve) is the model that looks at the dynamics of output and inflation. It takes into account the central bank policy decision to adjust the inflation and real interest rate in the economy. It enables the economist to weather to priorities between employment and inflation rate analyzing the model. It is a practice-driven approach adopted by economists worldwide.
IS-LM Analysis
The term IS stands for Investment, Savings, and LM stands for Liquidity Preference, Money Supply. Therefore, the term IS-LM model is known as Investment Savings – Liquidity preference money Supply. This model was introduced by a Keynesian macroeconomic theory which shows the relationship between the economic goods market and loanable funds market or money market. In other words, it shows how the market for real goods interacts with the financial markets to strike a balance between the interest rate and total output in the macroeconomy. This particular model is designed in the form of a graphical representation of the Keynesian economic theory principle. The output and money are the two important factors in an economy.
![The president of the Federal Reserve Bank of
Philadelphia
Washington, DC
New York
Chicago
Question 17
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Under a policy of interest-rate targeting, an increase in aggregate spending
increases the target interest rate.
increases the money supply.
reduces the target interest rate.
O reduces the money supply.
Question 18
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____always sits on the FOMC.
The federal funds rate is:
O the rate of M1 money growth.
the percentage of federal funds held in a bank's vault.
an interest rate that is set by the Fed.
a market interest rate for federal funds.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7e92ebab-c566-40b5-add1-48c33be6a962%2F0fdf10d6-ba83-458a-8a27-5acda4b4d647%2F3bk3dze_processed.jpeg&w=3840&q=75)
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