For 10 points, identify this model in which GDP is plotted against interest rate, whose equilibrium occurs at the intersection of its namesake curves.
This model can be extended to consider trade in the open economy by pairing it with the interest parity relation, leading to the "impossible trinity;" that extension is known as the Mundell-Fleming model. A component of this model is computed by considering price level, income and the liquidity preference function. The impacts of fiscal and monetary policy can be determined by considering shifts in the curves in this model. It was developed by John Hicks based on the ideas presented in The General Theory of Employment, Interest, and Money. For 10 points, identify this model in which GDP is plotted against interest rate, whose equilibrium occurs at the intersection of its namesake curves.
This model can be extended to consider trade in the open economy by pairing it with the interest parity relation, leading to the "impossible trinity;" that extension is known as the Mundell-Fleming model.
IS/LM model [or Investment Saving/Liquidity Preference Money Supply model]