<p>Yes. The LM curve is a combination of all such points where money market is in equilibrium. You can see this from the picture below I took from Blanchard et al. Macroeconomics: a European perspective.</p>
<p><a href="https://i.sstatic.net/NxTIy.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/NxTIy.png" alt="enter image description here" /></a></p>
<p>The IS-LM equilibrium occurs when IS-LM curve intersect as seen on picture below (again taken from Blanchard et al.)</p>
<p><a href="https://i.sstatic.net/Uysw1.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/Uysw1.png" alt="enter image description here" /></a></p>
<p>No matter where IS-LM points intersect there will be a direct mapping from any point along LM curve (as shown in first picture) directly onto the money market. Hence any equilibrium IS-LM interest rate will be also money market equilibrium interest rate (as correctly pointed out by Giskard in comments these are the same interest rate). Hence, in the standard textbook exposition of the model these will be always same.</p>

CC BY-SA 4.0
2020-09-22T13:10:06.803Z
Wouldn't this imply that 5% is just *an* equilibrium rate of the money market, rather than *the* equilibrium rate of the money market? (It is *the* equilibrium rate of the IS-LM model.)
Giskard
CC BY-SA 4.0
2020-09-22T13:11:53.847Z
@Giskard well actually, yes. I just tried to work within the language used by OP in the question, but yes because in the general equilibrium in IS-LM model there is just one interest rate.
1muflon1
CC BY-SA 4.0
2020-09-22T13:07:29.380Z
2020-09-22T13:12:38.487Z
2020-09-22T13:12:38.487Z
1muflon1
<p>If IS-LM equilibrium interest rate is, let's say, 5%, does it also mean that the money demand and supply equilibrium interest rate would also be 5%?</p>

<macroeconomics>
Is the money market equilibrium interest rate the same as the IS-LM equilibrium rate?
Avi
# Is the money market equilibrium interest rate the same as the IS-LM equilibrium rate?

(Asked by: username_0 on 2020-09-22)

If IS-LM equilibrium interest rate is, let's say, 5%, does it also mean that the money demand and supply equilibrium interest rate would also be 5%?

**Tags:** macroeconomics


---

## 1 answers

### Answer by username_1 on 2020-09-22. Score: 0 | Accepted answer

Yes. The LM curve is a combination of all such points where money market is in equilibrium. You can see this from the picture below I took from Blanchard et al. Macroeconomics: a European perspective.

[![enter image description here](https://i.sstatic.net/NxTIy.png)](https://i.sstatic.net/NxTIy.png)

The IS-LM equilibrium occurs when IS-LM curve intersect as seen on picture below (again taken from Blanchard et al.)

[![enter image description here](https://i.sstatic.net/Uysw1.png)](https://i.sstatic.net/Uysw1.png)

No matter where IS-LM points intersect there will be a direct mapping from any point along LM curve (as shown in first picture) directly onto the money market. Hence any equilibrium IS-LM interest rate will be also money market equilibrium interest rate (as correctly pointed out by username_2 in comments these are the same interest rate). Hence, in the standard textbook exposition of the model these will be always same.

> **Comments:**
> **username_2**: Wouldn't this imply that 5% is just *an* equilibrium rate of the money market, rather than *the* equilibrium rate of the money market? (It is *the* equilibrium rate of the IS-LM model.)  
> **username_1**: @username_2 well actually, yes. I just tried to work within the language used by OP in the question, but yes because in the general equilibrium in IS-LM model there is just one interest rate.  

---

