Created by: gwideman, Dec 29, 2011 12:24 am
Revised by: gwideman, Mar 12, 2012 1:52 am (20 revisions)


A collection of links to tutorials that I found useful.


Danby, U of Washington

Outline of Danby's pages

Danby's pages reformatted to print-friendly PDFs

MicoSchwartz macrotutor

micoshwartz macrotutor: Step-by-step IS-LM tutorial:


  • Variables quantities (upper case)
    • Notes
      • Some variables are stocks, some flows
      • Measurement units shown in [square brackets].
      • It's not clear to me which are values measured in "real" (inflation-adjusted) money units, and which are in currency units, or whether it matters.
    • A: A-bar = Exogenous Demand for goods (not sure why this isn't D-bar). [MoneyUnit/TimeUnit]
    • AD: Aggregate Demand [MoneyUnit/TimeUnit]
    • C: Consumption [MoneyUnit/TimeUnit].
      • C-bar: Autonomous consumption: minimum possible consumption.
    • G: Government spending [MoneyUnit/TimeUnit]
    • I: Investment (ie: firms spending on plant) [MoneyUnit/TimeUnit]
    • L: Liquidity (demand for real [inflation-adjusted] money) [MoneyUnit, I think]
      • Alternatively: MD.
      • L/P: "Demand for 'real' balances"
    • M: Money supply from central bank [MoneyUnit, I think]
      • Alternatively: MS.
      • M/P gives money supply independent of inflation, so called "real" money supply.
    • P: Price "average price of goods" [MoneyUnit]
    • S: Savings (ie: households saving) [MoneyUnit/TimeUnit?]
    • Y: Variously, Production or Income [MoneyUnit/TimeUnit]
      • Yd: disposable income
  • Rates (lower case)
    • b: Sensitivity of investment to interest rate. [MoneyUnit/TimeUnit]
      • Problem in macrotutor: Either algebra for I and AD is wrong, or b must not be a zero-to-one, but instead a large number in the same units as I and AD, as I've chosen here.
    • c: Marginal propensity to consume ("MPC")
    • h: Sensitivity of demand for real money (L) to interest rate [MoneyUnit?]
      • Problem in macrotutor: Either algebra for L is wrong, or h must not be zero-to-one, but instead a large number with the same units as L, as I've chosen here.
    • i: interest rate [Amount/Amount = 1]
    • k: Sensitivity of demand for money (L) to Income (Y)
    • t: tax rate (usually on Y) [Amount/Amount = 1]
  • Symbols
    • Overbar: Indicates "endogenous to the model" (ie: for the purposes of the immediate exercise, this is a constant, or at least set externally)
    • Subscripts: Used as usual to indicate distinct values or versions of a variable.
    • Prime: Used as usual to mean a variable that has changed value.
    • Superscripts: Used as most other disciplines use subscripts: to indicate a special instance of the variable or quantity indicated by the main letter.
    • Asterisk superscript: Added to a variable name to indicate a value that's at equilibrium.

More tutorials on IS-LM

Comments on IS-LM and its validity

Course Videos: Glasses and Beard guy

From youtube lostmy1's channel

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