Monday, October 17, 2011

ISLM and the flow model

The flow model.  The IS line is flow out, the LM line is flow in., the y axis is inventory growth internal to the firm, the x axis total firm real GDP.  The more inventory I purchase on input, the greater my inventory growth and the greater the real GDP.  The more I sell on output the lower my inventory growth and the greater real GDP. I want the differences between ins and outs to balance.

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