Of the following comments related to equilibrium level in an IS-LM model, which best denotes the logical causality, and why?

A. The goods and services market as denoted by IS curve gives an equilibrium level of Y, which when posited in the LM curve gives the equilibrium level of r.

B. The goods and services market as denoted by the IS curve gives an interest rate as a function of Y which helps solve for equilibrium in the money market.

C. The equilibrium rate of interest as determined by the demand for real balances for a given level of money supply in the money market helps determine the equilibrium level of investment that finally helps reach an equilibrium level of income.

Question

Of the following comments related to equilibrium level in an IS-LM model, which best denotes the logical causality, and why?

A. The goods and services market as denoted by IS curve gives an equilibrium level of Y, which when posited in the LM curve gives the equilibrium level of r.

B. The goods and services market as denoted by the IS curve gives an interest rate as a function of Y which helps solve for equilibrium in the money market.

C. The equilibrium rate of interest as determined by the demand for real balances for a given level of money supply in the money market helps determine the equilibrium level of investment that finally helps reach an equilibrium level of income.

Quizplus · Accepted Answer

The Answer of Of the following comments related to equilibrium level in an IS-LM model, which best denotes the logical causality, and why?

A. The goods and services market as denoted by IS curve gives an equilibrium level of Y, which when posited in the LM curve gives the equilibrium level of r.

B. The goods and services market as denoted by the IS curve gives an interest rate as a function of Y which helps solve for equilibrium in the money market.

C. The equilibrium rate of interest as determined by the demand for real balances for a given level of money supply in the money market helps determine the equilibrium level of investment that finally helps reach an equilibrium level of income.

Of the Following Comments Related to Equilibrium Level in an IS-LM