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.
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:
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.
The steps involved are:
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
Overview of Macro Models
Overview of Micro Models