The IS-LM Model: Computation of equilibrium (brief)

( )
( )
( )
1
1 1
1
S
S
Y I G b r
Y I G b r
c
M
Y h r M
k Y h r
k P
P

t
- -
- -
- -
- -

= +
= +

| |
= +
|
=
\ .

Computation of the equilibrium interest rate

( )
( )
1
1
S
S
M
h r I G b r
k P
h M
b r I G
k k P

- -
-
| |
+ = +
|
\ .
| |
+ = +
|
\ .

( )
1
S
M
I G
k P
r
h
b
k

-
+
=
+


( )
1
S
k M
r I G
h bk h bk P

-

= +
+ +


Computation of the equilibrium production level

1
S
M
Y h r
k P
- -
| |
= +
|
\ .

( )
1 1
S S
M h h M
Y I G
k P h bk k h bk P

-

= + +
+ +

( )
( )
1
1
1
S
S
h h M
Y I G
h bk k h bk P
h h bk h M
Y I G
h bk k h bk P

-
-
| |
= + +
|
+ +
\ .
+
= + +
+ +


( )
S
h b M
Y I G
h bk h bk P


-

= + +
+ +