Interactive IS-LM Model

IS-LM Model is a fundamental model based on Keynesian macroeconomics. IS-LM model allows us to understand more fully the sources of business cycles and what can be done by the government to dampen, or ideally, to eliminate business cycles.

Monetary policy, controlled by the Federal Reserve Board, can be used to change interest rates and hence equilibrium real GDP.

Fiscal policy, controlled by Congress and the president, can also be used to change equilibrium real GDP and the interest rate by means of changes in government spending, autonomous tax revenue, and the income tax rate.

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Source : 2009,R.Gordon,Macroeconomics Eleventh Edition