The LM curve slopes upward. The IS-LM model explains how aggregate real goods market and financial markets interact to balance the macroeconomy's interest rate and overall output. Investment Savings-Liquidity Preference-Money Supply, or IS-LM. The model was created as a formal graphic illustration of a Keynesian economic theory premise.
The letters "IS" stand for one curve on the IS-LM curve, while "LM" stands for an other curve. The IS-LM framework can be used to explain how shifts in market preferences affect the equilibrium values of the GDP and market interest rates. The IS-LM model is neither realistic or precise enough to be a helpful instrument for recommending economic policy.
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