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Based on Your Understanding of the IS-LM Model,graphically Illustrate and Explain

question 73

Essay

Based on your understanding of the IS-LM model,graphically illustrate and explain what effect a reduction in consumer confidence will have on output,the interest rate,and investment.


Definitions:

Equilibrium Price

The price at which the quantity of goods supplied is equal to the quantity of goods demanded in the market.

Supply and Demand

The basic economic principle that determines the price of goods and services in a market, based on the quantity available (supply) and the desire of consumers to purchase (demand).

Demand Curve

A visual model that illustrates the link between the cost of a commodity and the volume of demand from buyers at those costs.

Secondary Market

A marketplace where investors buy and sell securities, such as stocks and bonds, from other investors rather than from issuing companies directly.

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