The Keynesian IS/LM Model explains how the economy can be in equilibrium even with unemployment in the labor market. There are two versions of this story in this application.

**Model Link:
IS/LM Basics
<**activate the model links>

Printable PDF Exercises

The IS/LM Basics application shows you how to derive the IS and LM curves and how to do the basic short-run analysis of monetary and fiscal policy assuming a fixed price level. The steps involved are:

- Derive IS Curve
- Derive LM Curve
- Monetary Policy
- Fiscal Policy (See the EconModel instructions to the right and one of the resulting graphics below.)

**Movie: Basic Monetary and
Fiscal Policy Analysis**

(2 min, 43 seconds)

The Aggregate Supply / Aggregate Demand extension adds to the analysis an AS/AD diagram that accommodates analysis of a flexible price level. You can then trace out the short-run and long-run implications of monetary and fiscal policy.

**
Model Link: Aggregate
Supply / Aggregate Demand
<**activate
the model links

Printable PDF Exercises

The steps involved are:

- Derive Aggregate Demand Curve
- Fiscal Policy, Short-Run and Long-Run
- Monetary Policy, Short-Run and Long-Run

You might also be interested in the Animated Phillips Curve Diagram. The original pre-1969 Phillips Curve appeared to support the idea that there was a stable tradeoff between inflation and unemployment, and this stylized fact was taken to support a Keynesian view of the economy.

**Classic
Economic Models**

**Macroeconomics**

**Introduction**

Overview of Macro Models

**Models in Chronological Order**

The Classical Model

The Simple Keynesian Model

The Keynesian IS/LM Model

The Mundell-Fleming Model

Real Business Cycles

The IS/MP Model

The Solow Growth Model

**Financial Markets
**
Utility-Based Valuation of Risk

Mean-Variance Analysis:

Risk vs. Expected Return

Fixed Income Securities:

Mortgage/Bond Calculator

Growth Investments:

Present Value Calculator

**Microeconomics**

**Introduction**

Overview of Micro Models

**Supply and Demand**

Basic Supply and Demand

Who Pays a Sales Tax?

The Cobweb Model and

Inventory-Based Pricing

**Theory of the Firm**

Perfect Competition

Monopoly and

Monopolistic Competition

Price Discrimination

The Demand for Labor

**Theory of the Consumer**

Two Goods - Two Prices

Intertemporal Substitution

Labor Supply, Income Taxes,

and Transfer Payments

**Resources**