Policy analysis with the Is-LM Model Y=c(r-T)+I(r)+G MP=L(Y) LM Policymakers can affect macroeconomic variables With fiscal policy: G and or T monetary policy: M We can use the is-LM model to analyze the effects of these policies CHAPTER 11 Aggregate Demand Il slide 2CHAPTER 11 Aggregate Demand II slide 2 Policy analysis with the IS-LM Model Policymakers can affect macroeconomic variables with • fiscal policy: G and/or T • monetary policy: M We can use the IS-LM model to analyze the effects of these policies. Y C Y T I r G = − + + ( ) ( ) M P L r Y = ( , ) IS Y r LM r1 Y1