Every point of intersection between an IS schedule and an LM curve can be characterized as specifying
A) a point on an aggregate demand curve for the underlying, predetermined price level.
B) a combination of interest rate and GDP such that the demand for money is equal to the supply of money.
C) an interest rate-GDP combination such that the consumption function, investment function, and income identity are all satisfied for a particular government spending-taxation combination.
D) an equilibrium combination of interest rates and GDP for both the goods market and the money market.
E) all of the above.

Question

Quizplus · Accepted Answer

Each statement accurately describes a characteristic of the intersection between an IS schedule and an LM curve. A) relates to macroeconomic theory where the intersection can represent a point on the aggregate demand curve at a given price level. B) describes the equilibrium in the money market where money demand equals money supply. C) refers to the goods market equilibrium where consumption, investment, and government fiscal policy align with the income identity. D) summarizes that both the goods and money markets are in equilibrium at this intersection.

Every Point of Intersection Between an IS Schedule and an LM