An economist teaches IS/LM

Economics lesson from UC:

I confess to being less confounded after Brad describes the IS/LM model as a three good model.
 I think is becomes, for me:  The economy distributes money, real goods, and bonds. Selling bonds raises interest rates. High interest rates go with high real goods output, so people would be spending more and hold money less.

Channel theory would put it as three goods filing a limited bandwidth channel with independent flow. The bandwidth is the left side of the yield curve, where it meets the noise. When the economy has less bandwidth, real goods shorten their supply chains and money builds and bonds flow. 


Basically future distribution of accumulating goods becomes more valuable than current distribution.
The nature of shortages in real goods. Th shortage imposes order on the market, an order that look a lot like the shortened supply chains of the real goods. There is a need to conserve resources for future, larger deliveries. Quant sizes have grown and transaction frequency lowered. The shortage imposed order is dissipated when the other two goods also contract their supply lines to match.