IS–LM Lab: Three Markets, One Equilibrium

A step-by-step IS–LM simulator for ECON 202 (Module 5), rebuilt from the Seville teaching experiment: three linked panels — income–expenditure, money market, IS–LM with the FE line — with ghost lines for the old curves and a disequilibrium walk-through, so you see why the economy moves, not just where it ends up.

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The central bank prints money. Why does output rise — and through which market first? Most IS–LM tools jump straight to the new intersection. This one doesn't. Change a lever and the curve that moves is highlighted, the old one stays as a faint ghost, and the economy is left out of equilibrium until you walk it back — one market at a time — to where IS and LM cross. The three panels are the three graphs we draw on the board: income–expenditure, the money market, and IS–LM.

How to use it
  • Move a policy lever (G, t, TR, M, P). Watch which curve shifts and which panel is now out of balance.
  • Press Step to let one market adjust at a time (money market sets r, then goods market sets Y, and so on). Press Finish to go straight to the new equilibrium. Switch to instant mode if you just want comparative statics.
  • Change the structure (c, b, k, h) to see special cases: h → 1 makes LM vertical; b → small makes IS steep so monetary policy loses its bite.
  • The vertical FE line is full-employment output Ȳ (Abel–Bernanke–Croushore, Ch. 9). Where IS–LM crosses away from FE the status card shows the output gap; press Long run: let P adjust to watch the price level move LM back to the FE–IS intersection — the classical closure.
  • Clear ghosts wipes the old curves; Set baseline makes the current state the new reference.

Policy levers

Structure

Adjustment

Income – expenditure (at current r)
Money market (at current Y)
IS – LM

Model and panel design follow Pablo-Romero, Pozo-Barajas & Gómez-Calero, Evaluation of Teaching the IS-LM Model through a Simulation Program, Educational Technology & Society 15(4), 2012, 193–204 (open access): DA = A̅ + c(1−t)Y − b·r with A̅ = C̅ + c·TR̅ + I̅ + G̅; L = kY − h·r; real money supply M/P. Interest rate in percent. Their C++ program was tested on 324 Seville students in 2009/10 — the simulator group scored 5.2/10 on the IS–LM exam question against 3.2 for the classroom-only group. This is an independent browser rebuild of that teaching design for ECON 202, written by Ravikiran Naik; no code is shared with the original. For a comparative-statics-only tool see the TU Berlin simulator.