Answer to Question #220525 in Macroeconomics for bunnybear

Question

Explain endogenous and exogenous variables in the IS-LM model as well as the labour markets, derive the AD-AS model.

Answer 1

In the LM model of interest rate determination, the supply of and demand for money determine the interest rate contingent on the level of the money supply, so the money supply is an exogenous variable and the interest rate is an endogenous variable.

The labor market, also known as the job market, refers to the supply of and demand for labor, in which employees provide the supply and employers provide the demand. It is a major component of any economy and is intricately linked to markets for capital, goods, and services.