The intersection of the “investment–saving” (IS) and “liquidity preference–money supply” (LM) curves models “general equilibrium” where supposed simultaneous equilibria occur in both the goods and the asset markets.

What is the nature of equilibrium in the IS-LM model?

The equilibrium condition of the IS-LM model is satisfied only at this point where there is neither excess demand nor excess supply in any one of the two markets – the goods market and the money market. So there is neither upward nor downward pressure on the level of income or on the rate of interest.

Is-lm long run equilibrium?

In the long run price level will fall till it does not reach the point where aggregate demand equals the aggregate supply. … This is attained at point B, at income level Y and at price level P2. Thus, Long run equilibrium is achieved by a shift in the LM curve.