IS, LM and AD Curves

CFA Level I Economics
#1

First of all congrats to everyone who passed!

The IS LM and Aggregate demand curves are giving me some trouble. IF anyone can correct me, clear this up, or point me to someplace that can, I would appreciate it

The IS curve is the plot of the relationship between income and real interest rates for which (S-I) = (G-T) + (X-M).

THe LM curve is the plot of the relationship between income and real interest rates for which money supply remains constant.

Aggregate demand curve is…??

Thank you ahead of time.

#2

Real GDP (= real aggregate income) vs. price level.

This article I wrote may help: http://financialexamhelp123.com/islm-deriving-aggregate-demand-synopsis/.

#3

S2000magician-thanks so much for this, a quick question re this please?

we know that an expansionary monetary policy shifts the AD to the right, if AD shifts to the right, that means that the entity (G-T)+(X-M) shifted to the right originally. Could you help with this please? thanks

#4

S2000 that does indeed help. Thank you

#5

Monetary policy would not affect the IS curve; fiscal policy affects G or T.

Monetary policy affects the LM curve: it shifts it to the right (higher money supply means a higher M/P ratio): thus, higher aggregate demand (for a given level of interest rates).

#6

Cool!

My pleasure.