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The IS-LM Model - Massachusetts Institute of Technology

The IS-LM Model - Massachusetts Institute of Technology

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Investment demand • Investment demand: I = I(Y,i) +,-– As output rises, investment demand increases. – As interest rates rise, investment demand falls. • Intuition: – Firms borrow to pay for investment project. With higher cost of borrowing, project is less likely to make a profit (net of interest payments).

  Technology, Institute, Massachusetts, Investment, Massachusetts institute of technology

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