I am doing a bachelor's in economics and taking macro right now. I was talking to one of my teachers (not the macro one) and he was explaining to me why the central banks stopped focusing in money supply. He got to the board and drew a graph with a downward sloping IS curve and an upward sloping LM curve and said that was the IS-LM. But that's not what I learned in the macro class. The IS-LM model I know has a downward sloping IS and a horizontal LM.
And so I looked at the textbook we use, which is Blanchard's (9th edition), and it shows the one I learned in the macro class. I eventually came to find out that this graph that Blanchard calls IS-LM is actually the IS-MP. As I have come to understand, the LM equation is M/P=YL(i). The formula used for the MP is that interest rates are exogenous and so there is no L nor M.
Is my understanding correct? And why are we calling one graph by the other one's name? And is it universal now to call the IS-MP "IS-LM"?
Is the IS-MP curve now called "IS-LM"?
byu/roquejosue inAskEconomics
Posted by roquejosue