I have to admit that I have rarely used the IS-LM model since I became interested in economics. Instead, I find the AD-AS model much more useful. Of course, this does not mean that there is a major theoretical flaw in the IS-LM model. Rather, I think that the inferences that economists make by looking at the model are wrong, and that the model leads both economists and students to "reasoning from a price change." To be more precise, it leads them to assume that changes in the interest rate are a good indicator of the monetary policy stance.
IS-LM is not a useful model
IS-LM is not a useful model
IS-LM is not a useful model
I have to admit that I have rarely used the IS-LM model since I became interested in economics. Instead, I find the AD-AS model much more useful. Of course, this does not mean that there is a major theoretical flaw in the IS-LM model. Rather, I think that the inferences that economists make by looking at the model are wrong, and that the model leads both economists and students to "reasoning from a price change." To be more precise, it leads them to assume that changes in the interest rate are a good indicator of the monetary policy stance.