<P> Although generally accepted as being imperfect, the model is seen as a useful pedagogical tool for imparting an understanding of the questions that macroeconomists today attempt to answer through more nuanced approaches . As such, it is included in most undergraduate macroeconomics textbooks, but omitted from most graduate texts due to the current dominance of real business cycle and new Keynesian theories . </P> <P> The model is presented as a graph of two intersecting lines in the first quadrant . </P> <P> The horizontal axis represents national income or real gross domestic product and is labelled Y . The vertical axis represents the real interest rate, r . Since this is a non-dynamic model, there is a fixed relationship between the nominal interest rate and the real interest rate (the former equals the latter plus the expected inflation rate which is exogenous in the short run); therefore variables such as money demand which actually depend on the nominal interest rate can equivalently be expressed as depending on the real interest rate . </P> <P> The point where these schedules intersect represents a short - run equilibrium in the real and monetary sectors (though not necessarily in other sectors, such as labor markets): both the product market and the money market are in equilibrium . This equilibrium yields a unique combination of the interest rate and real GDP . </P>

What is the difference between is and lm curves