Goods and financial markets The IS LM mo

Goods a n d fin a n cia l
m a r k e t s:
Th e I S- LM m ode l

Chapt er 5

5 .1 The goods m a r k e t a nd t he I S r e la t ion
I n ve st m e nt , sa le s a n d t h e in t e r e st r a t e

D e t e r m in in g ou t pu t

5 .1 The goods m a r k e t a nd t he I S r e la t ion

Figur e 5 .1 Equilibrium in t he goods m arket

5 .1 The goods m a r k e t a nd
t he I S r e la t ion

Figur e 5 .2 The derivat ion of t he I S curve

5 .1 The goods m a r k e t a nd t he I S r e la t ion

Figur e 5 .3 Shift s of t he I S Curve

5 .2 Fina ncia l m a r k e t s a nd t he LM r e la t ion
Re a l m on e y, r e a l in com e a n d t h e in t e r e st r a t e

5 .2 Fina ncia l m a r k e t s a nd t he LM r e la t ion

Figur e 5 .4 The derivat ion of t he LM curve

5 .2 Fina ncia l m a r k e t s a nd t he LM r e la t ion

Figur e 5 .5 Shift s of t he LM curve

5 .3 Put t ing t he I S a nd t he LM r e la t ions t oge t he r

Figur e 5 .6 The I S–LM m odel

5 .3 Put t ing t he I S a nd t he LM r e la t ions t oge t he r

Figur e 5 .7 The effect s of an increase in t axes

5 .3 Put t ing t he I S a nd t he LM r e la t ions t oge t he r

Figur e 5 .7 The effect s of an increase in t axes ( cont .)

5 .3 Put t ing t he I S a nd t he LM r e la t ions t oge t he r

Figur e 5 .7 The effect s of an increase in t axes

5 .3 Put t ing t he I S a nd t he LM r e la t ions t oge t he r

Figur e 5 .8 The effect s of a m onet ary expansion

5 .3 Put t ing t he I S a nd t he LM r e la t ions t oge t he r

Ta ble 5 .1 The effect s of fiscal and m onet ary policy

Focus: The Sout h Afr ica n r e ce ssion of 2 0 0 8

Figur e 1 Real gross dom est ic expendit ure for Sout h Africa
( R m illions)

Focus: The Sout h Afr ica n r e ce ssion of 2 0 0 8

Figur e 2 Econom ic growt h in Sout h Africa

Focus: The Sout h Afr ica n r e ce ssion of 2 0 0 8

Figur e 3 Expendit ure growt h in Sout h Africa

Focus: The Sout h Afr ica n r e ce ssion of 2 0 0 8

Figur e 4 Repurchase rat e in Sout h Africa

Focus: The Sout h Afr ica n r e ce ssion of 2 0 0 8

Figur e 5 Nat ional governm ent revenue and expendit ure in Sout h Africa

Focus: The Sout h Afr ica n r e ce ssion of 2 0 0 8

Figur e 6 The SA recession of 2008

5 .5 H ow doe s t he I S- LM m ode l fit t he fa ct s?

Figur e 5 .9 The em pirical effect s of an increase in t he federal funds rat e

5 .5 H ow doe s t he I S- LM m ode l fit t he fa ct s?

Figur e 5 .9 The em pirical effect s of an increase in t he federal funds rat e ( cont .)

Appe ndix : An a lt e r na t ive de r iva t ion of t he LM
r e la t ion a s a n int e r e st r a t e r ule

Figur e 1 The LM relat ion as an int erest rat e rule