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8. IS–LM Model:
The IS–LM model combines the goods and money markets. The intersection of the IS
and LM curves determines equilibrium income
and the interest rate in the economy. This model is widely used to analyze the effects of
fiscal and monetary policies.
Overall, these diagrams form the analytical framework of macroeconomics. Together,
they explain how income is generated,
how economies fluctuate, and how policy tools can be used to stabilize economic
activity.
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