Question

The IS-LM view of the world with more complex financial

markets Consider an economy described by Figure 6-6 in the
text.
a. What are the units on the vertical axis of Figure 6-6?
b. If the nominal

Answer 1

The vertical axis of Figure 6-6 in the IS-LM model represents the interest rate, which is a measure of the cost of borrowing money. The nominal interest rate in the IS-LM model influences investment and saving decisions in the economy, affecting the level of real GDP and the price level.

Step-by-step explanation:

In the IS-LM model of the global financial system, the vertical axis represents the interest rate. The interest rate is a measure of the cost of borrowing money and is usually expressed as a percentage. It represents the return on investment or the cost of financing.

In the IS-LM model, the nominal interest rate is a key factor that affects investment and saving decisions in the economy. Changes in the nominal interest rate can impact the demand for goods and services, influencing the level of real GDP and the price level.