In the IS-LM model, analyze the effects of increased optimism among banks on all the endogenous...

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Economics

In the IS-LM model, analyze the effects of increasedoptimism among banks on all the endogenous variables (Y, r, I, S,C, T, L1, L2).

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The ISLM model which stands forinvestmentsavings IS and liquidity preferencemoney supplyLM is a Keynesian macroeconomic model that shows how the marketfor economic goods IS interacts with the loanable funds marketLM or money market It is represented as a graph in which the ISand LM curves intersect to show the shortrun equilibrium betweeninterest rates and outputThe ISLM model describes how aggregate markets for real goodsand financial markets interact to balance the rate of interest andtotal output in the macroeconomyISLM was devised as a formal graphic representation ofKeynesian economic theoryISLM can be used to describe how changes in market preferencesalter the equilibrium levels of GDP and market interest rates butthe model lacks the precision and realism to be a usefulprescription tool for economic policyThe ISLM graph consists of two curves IS and LM Grossdomestic product GDP or Y is placed on the horizontal axisincreasing to the right The interest rate or i or R makes upthe vertical axis The IS curve depicts the set of all levels ofinterest rates and output GDP at which total investment Iequals total saving S At See Answer

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