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Social Sciences
Economics
1937
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IS-LM Equilibrium

Y=C(Y−T)+I(r)+G,M/P=L(Y,r)Y = C(Y-T) + I(r) + G,\quad M/P = L(Y,r)

Goods market and money market jointly determine output and interest rate.

By Hicks, Hansen

Social Sciences
IS-LM Equilibrium
1937 · Hicks
Why it matters: Standard framework for fiscal and monetary policy analysis for 50+ years.

Discoverers: Hicks, Hansen (1937)

What does it mean?

Goods market and money market jointly determine output and interest rate.

Why should I care?

Standard framework for fiscal and monetary policy analysis for 50+ years.

Variables & Units

SymbolNameUnitMeaning
YYOutput—Income
rrInterest rate—Rate
GGGovernment spending—Fiscal policy
M/PM/PReal money—Liquidity

Worked Example

Expansionary fiscal policy shifts IS right → higher Y and r.

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Sources & further reading

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Equation Universe

IS-LM Equilibrium

Y=C(Y−T)+I(r)+G,M/P=L(Y,r)Y = C(Y-T) + I(r) + G,\quad M/P = L(Y,r)

Real-world impact

Global economy

Quantitative models shape markets and policy.

Photo: Unsplash — financial markets

Goods market and money market jointly determine output and interest rate.

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