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Equilibrium in the money market
In the IS-LM-model, we have equilibrium in the money market when
MD(Y, R) = MS
This is the equation from money market and we have already one equation from aggregate demand which is,
YD(Y, R) = C(Y) + I(R) + G + X - Im(Y)
Now we will conclude all endogenous variables in the IS-LM model:
YD(Y, R) = Y equilibrium in the goods market
MD(Y, R) = MS equilibrium in the money market
Now we have two equations and two unknown (Y and R) and in most cases we can find a unique solution to system of equations.
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