Definition & Reality in the General Theory of Political Economy

by Thomas Cool

Liquidity demand is:

L = k (1 + h / (i - i_min)) YR

Equilibrium on the money market L = MX / P gives the LM curve:

(LM)

Intersection of the IS and LM curves gives equilibrium for YR and i, and from these the other variables can be solved, in particular the price level P = MX / L[YR, i].

Note that we also use: [72]

Y = P YR