In this clip the aggregate demand curve (AD) is derived assuming a decrease in the price level. The decrease in the price level increases the real money supply. In the IS-Lm model this is indicated by a rightward shift of the LM curve. As the real money supply increases the interest rate declines and declines investment spending, demand for goods and equilibrium income increase. This is represented by a movement along the IS curve. By changing the price level different points are derived indicating different combinations of the price level and the level of output and income where the goods and financial markets are in equilibrium.
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