Question

Describe in detail the similarities and the differences between IS - LM and AD - AS model Write in your Own Words. Explain (macroeconomic)

Answer 1

AD-AS and IS -LM models are widely used tools in macroeconomic areas. Many policies and decisions are taken with the use of these models. Both the models have based on the principles of price adjustments and various economic issues etc
The IS- LM model mainly based on three curve i.e the LM curve and and IS curve and and a Full employment line. these three are intersected each other in this model. LM curve mainly express the relationship between the nominal interest and income or expenditure.and which made assumption regarding equilibrium in demand and supply of money. The is curve is also express the interest rate and income.but here main assumption is demand and supply of goods are equilibrium.The full employment line also the relationship between the interst rate and output and here assumption based on the labour market.,which is equal in demand and supply.so the IS - LM model is apply in three markets that is money ,goods and labour market. Which are always present in equilibrium. The short run case mainly use the Is and LM curve and long-run it make interclsction in is and fe curve. So Is - LM model used in short run analysis and also in these markets general equilibrium situation.

The AD-As model is also known as aggregate demand and aggregate supply curve. So this model made intersection between AD curve and AS curve. AD curve is expressed mainly price and desired expenditure. And the aggregate supply curve is relationship between price and output .The aggregate demand curve created from the previous model IS -LM.
The major difference of AD- AS model derived from the the IS-LM model. The AD- AS is the model for the business cycle but IS - LM model is the model of employment ,interst ,money.