Equilibrium in the IS-LM Model The Is curve represents equilibrium in the goods LM market y=C(y-7)+C()+G The LM curve represents i money market equilibrium M/P=L(Y) The intersection determines the unique combination of y and r that satisfies equilibrium in both markets CHAPTER 11 Aggregate Demand Il slide 1CHAPTER 11 Aggregate Demand II slide 1 The intersection determines the unique combination of Y and r that satisfies equilibrium in both markets. The LM curve represents money market equilibrium. Equilibrium in the IS-LM Model The IS curve represents equilibrium in the goods market. Y C Y T I r G = − + + ( ) ( ) M P L r Y = ( , ) IS Y r LM r1 Y1