2. the slope of IS curve and its policy implications

3. r IY S IS curve the smaller the elasticity of investment the steeper the IS curve

4. r IY S IS curve the greater the elasticity of investment the flatter the IS curve

5. r IY S IS curve the larger the marginal propensity to save the steeper the IS curve

6. r IY S IS curve the flatter the IS curve the smaller the marginal propensity to save

7. Policy Implications

8. Policy Implication: a steeper IS curve (expansionary monetary policy) r Y IS LM LM’ Y 1 Y 2

9. r Y IS LM LM’ Y 1 Y 2 Policy Implication: a flatter IS curve (expansionary monetary policy)

10. r Y IS 1 LM Y 1 Y 2 Policy Implication: a steeper IS curve (expansionary fiscal policy) IS 2

11. r Y IS 1 LM Y 1 Y 2 Policy Implication: a steeper IS curve (expansionary fiscal policy) IS 2

12. the slope of LM curve and its policy implications

13. r MaY Mt LM curve 45 0 the smaller the interest elasticity of money demand the steeper the LM curve

14. r MaY Mt LM curve 45 0 the larger the interest elasticity of money demand the flatter the LM curve

15. r MaY Mt LM curve 45 0 the larger the income elasticity of money demand the steeper the LM curve

16. r MaY Mt LM curve 45 0 the smaller the income elasticity of money demand the flatter the LM curve

17. Policy Implications

18. Policy Implication: a steeper LM curve (expansionary monetary policy) r Y IS LM LM’ Y 1 Y 2

19. Policy Implication: a flatter LM curve (expansionary monetary policy) r Y IS LM LM’ Y 1 Y 2

20. Policy Implication: a steeper LM curve (expansionary fiscal policy) r Y IS LM Y 1 Y 2 IS’

21. Policy Implication: a steeper LM curve (expansionary fiscal policy) r Y IS’ LM Y 1 Y 2 IS

22. Extreme Cases

23. A vertical IS curve r Y IS LM LM’ monetary policy

24. A vertical IS curve r Y IS LM IS’ Y 1 Y 2 no crowding out effect fiscal policy

25. A vertical LM curve r Y LM Y 1 Y 2 LM IS monetary policy

26. A vertical LM curve r Y LM IS’ fiscal policy IS

27. A horizontal IS curve r Y LM monetary policy IS LM’ Y 1 Y 2

28. A horizontal LM curve r Y LM fiscal policy IS Y 1 Y 2 IS’

29. AL 96/7 Y IS 1 LM 1 Y* IS 2 IS 3 LM 2