Sunday, October 16, 2011

Wandering among the ISLMics

I will never be consistent, don't hold me to it.  Just wandering among the continuing ISLM thingy:

Let's see.  Pick a level on the graph of distribution, level three in a four rank network.  The firm at this level has dual optimization functions: deplete current inventories a little faster with increase output today and lower inventory tomorrow; or increase inventory today with purchases of much large units of inputs today, in expectation of greater output tomorrow.

So, the LM curve is managing the input flow, the IS curve the output flow, the vertical axis is the estimated inventory growth.

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