The IS-curve in the AS-AD model

The IS-curve is not affected by P in the AS-AD model

We can define an IS-curve in the AS-AD model similarly to the IS-LM model: it will give us all combinations of R and Y where goods market is in equilibrium, which is, where aggregate demand is equal to GDP, Y_D(Y, R) = Y.

Since P doesn't affect any part of goods market, P won't affect the IS curve. IS curve in the AS-AD model is exactly the same as IS-curve in IS-LM model.

Posted Date: 8/16/2013 2:19:44 AM | Location : United States

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