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A GRAPH REPRESENTATION OF A BASIC MACROECONOMIC SCHEME: THE IS-LM MODEL
 

 

by Valentino Piana (1998-2001)


 
IS-LM model in a graph representation
 

 

Arrows express an influence of the first variable on the second one.

A sign "+" means that the change in the first variable provokes a change in the same direction for the second ("an increase give rise to an increment"). By contrast, a sign "-" shows that the change in the second variable will be in the opposite direction ("a fall in ... will increase ...").
Click directly on the interactive map for macroeconomics concepts and relationships.
For a justification of the signs, just click here.
For two examples of interpretation of the scheme, see here.

If you have never heard of IS-LM model click here.

The key concepts involved in this scheme
(GDP, consumption, investment, interest rate,...)
are introduced here.

If you would like to modify this graph, e.g. for changing the names of the variables in accordance with your preferite textbook or for adding new variables / relationships, just download the MS Word file with the macroeconomics system map from here.

US economy data for all the variables in IS-LM model

EU economy data for all the variables in IS-LM model
(Germany, France, Italy, Spain, UK, Switzerland
and other 13 European countries)

If you can't see the entire scheme on the screen, you may try to customize your browser, for example hiding the MS Explorer buttons (Menu: View; Line: Toolbars; Option: Standard Buttons - unchecked) or Netscape buttons (Menu: View; Line: Show; Option: Navigation Bar - unchecked).
 
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Contents


 
 
1. Introduction to our graph representation
 
 
2. The rules
 
 
3. The scheme
 
 
4. Reading the scheme: two examples
 
 
4.1. Export-led growth
 
 
4.2. Fiscal cuts
 
 
5. The advantages of this representation
 
 
Appendix 1. Justification for signs in relationships
 
 

Appendix 2. Introduction for absolute beginners

 
 
 
 
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