What do IS-LM denotes in the context of goods and money market in a closed economy? Describe the derivation of IS and LM curve in a closed economy. How do expansionary fiscal policy affect the level of output and interest rate in an economy? Explain.
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Answer:
Easy.
Explanation:
I don't think it necessarily has a larger effect in one model or the other. Keep in mind these silly little models are not drawn to scale. They're almost always drawn without any vertical or horizontal intercepts, because the models break down completely anywhere near the axes.
You can't take these things too seriously - they're just supposed to help you think about big ideas.
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