Economic Themes (2010) 48 (2) 10, 265-280

GENERAL EQUILIBRIUM, DISADVANTAGES AND DILLEMAS IN RELATION WITH THE IS-LM MODEL


Milena Jakšić

Abstract: The basic task of economic analysis is to fortify the interrelationships that exist between economic phenomena and processes, because of their explanations and foresight. In that purpose, the economic analysis uses the economic models. Since the models present the simplified picture of reality, and reality may vary from one to the other situation, it is necessary to construct a large number of models. One of the most used frameworks for the need of economic analysis is IS-LM model. This model is useful for the economists in order to envisage how commodity and money market function integrally. It is one of the most significant models, which is used for the understanding of the basic economic variables.

Keywords:  IS curve; LM curve; IS-LM model; commodity market; money market; interest rate; national income

PDF file