Macroeconomics · A module in ten lessons
IS–LM to AD–AS, from zero to exam level
How the interest rate, output, prices and unemployment are decided together in the short run: the model at the centre of every macroeconomics paper. This module builds it one curve at a time, from why people hold money to Mundell–Fleming, until the 390 past-paper questions sorted into its lessons feel routine.
390past-paper questions, each placed in a lesson
74of them the Delhi School’s harder ones, gathered in Lesson 10
10lessons, all live
1prerequisite: the Keynesian cross, from the foundations module
This is a course, not a single article.10 lessons that build on each other, each about 40 minutes, with its own interactives, checked exercises and graded past papers. Take them in order, or let the diagnostic tell you where to begin.
The path
The lessons
0 of 10 doneYour progress is saved on this device.
- Lesson 1
Why hold money? The demand for money
The quantity theory and the Cambridge k, Keynes's three motives, why bond prices fall when interest rates rise, Baumol–Tobin, Friedman, and the liquidity trap.
- Lesson 2
The IS curve: the goods market
Adding the interest rate to the Keynesian cross: how each interest rate gives an equilibrium income, what sets the slope of IS, and what shifts it.
- Lesson 3
The LM curve: the money market
Money demand meets a fixed money supply: why higher income needs a higher interest rate, what sets the slope of LM, and its vertical and horizontal extremes.
- Lesson 4
IS and LM together
Solving for income and the interest rate at once, the four regions off equilibrium and how the economy moves back, and expected inflation in the model.
- Lesson 5
Fiscal and monetary policy in IS–LM
Crowding out, the policy multipliers, when each policy works best, the liquidity trap and classical extremes, the policy mix, Ricardian equivalence and the Taylor rule.
- Lesson 6
Aggregate demand and aggregate supply
Deriving AD from IS–LM, the Keynes and Pigou effects, classical, Keynesian and sticky-wage supply, and demand and supply shocks from the short run to the long.
- Lesson 7
The Phillips curve as aggregate supply
The Phillips curve as short-run supply seen from the labour market, wage-setting and price-setting and the natural rate, and the cost of disinflation. The full topic is in the inflation and Phillips curve module.
- Lesson 8
Expectations and the great debates
Adaptive and rational expectations, policy ineffectiveness, the Lucas critique, real business cycles, New Keynesians, and business-cycle theories in order.
- Lesson 9
The open economy: Mundell–Fleming
Exchange rates and capital mobility, fixed against floating rates, why one policy works and the other doesn't, the impossible trinity, sterilisation and the BP curve.
- Lesson 10
The Delhi School problems
The DSE's harder questions on this module: IS–LM in letters, supply from the labour market, and open-economy models. The wage-setting and price-setting ones are in the inflation module.
Four parts
Lessons 1 to 3 build the two markets: why people hold money, then the IS and LM curves. Lessons 4 and 5 put them together and use them for policy. Lessons 6 to 8 let prices and wages move: aggregate supply, the Phillips curve and expectations. Lesson 9 opens the economy, and Lesson 10 gathers the Delhi School’s harder questions. It starts where the macroeconomics foundations module ends: its Keynesian cross becomes the IS curve here.
Where to start
A five-minute diagnostic
18 questions, two for each lesson so far. Your answers tell you which lesson to start with.
Question 1 of 18
A bond pays ₹50 a year for ever and the interest rate is 5%. Its price is
The goal
What you will be able to solve
Nine real questions, from the easiest level to the hardest. By the end of the module each should take you under three minutes.
FoundationIIT JAM 2024 · Lesson 1
Nominal GDP equals 1,000 units and the money supply 250 units. By the quantity theory, what is the velocity of money?
FoundationHyderabad 2020 · Lesson 4
If the Reserve Bank of India increases the money supply, you would expect income to ____ and interest rates to ____.
FoundationCUET 2022 · Lesson 7
The natural rate of unemployment equals the sum of which two kinds of unemployment?
StandardGATE 2025 · Lesson 4
IS: Y = 490 + 0.6Y − 4r + G, LM: M/P = 20 + 0.25Y − 10r. With G = 330 and M/P = 500, what is equilibrium income?
StandardHyderabad 2018 · Lesson 5
Two economies differ only in their MPC. The money supply rises equally in both. Which gets the bigger rise in output, and the smaller fall in the interest rate?
StandardIIT JAM 2021 · Lesson 7
Full-employment output is ₹1 trillion, the natural rate of unemployment 6% and actual unemployment 8%. By Okun's law, how big is the output gap?
AdvancedDSE 2021 · Lesson 10
With πₜ − πₜᵉ = 0.1 − 3uₜ and πₜᵉ = πₜ₋₁, inflation last year was 2% and the central bank holds unemployment at 3% for ever. What is inflation in each of the next four years?
AdvancedDSE 2004 · Lesson 10
Labour demand is 1 − w and supply w, but the nominal wage can't fall below W₀. What is employment at price level P, and what does the aggregate supply curve look like?
AdvancedDSE 2021 · Lesson 10
A small open economy has flexible exchange rates and perfect capital mobility. The government raises spending on imported goods. What happens to output and the interest rate?
How it teaches
How each lesson works
- 1A question to hold on to
Each lesson opens with a real exam problem you can't yet solve, and solves it at the end.
- 2Intuition, then picture, then formula
The formula arrives last, as shorthand for something you already understand.
- 3Pause and predict
Commit to an answer before reading on. Being wrong first is what makes it stick.
- 4Worked exam problems
Real past questions, reworked step by step. Where a key is wrong, the lesson says so.
- 5The traps
The wrong options examiners actually use, and why they tempt.
- 6Check, then practise
Checked exercises, a one-screen summary, then graded past papers.
The evidence
Where the questions come from
Delhi School of Economics84
JNU79
Hyderabad76
CUET-PG65
UGC NET46
IIT JAM25
GATE15
Questions placed in this module, by exam.
Hyderabad and JNU ask the most. Hyderabad’s questions are mostly definitions and directions: which way a curve shifts, which policy works. JNU sets numerical IS–LM problems and statement questions on the Phillips curve. CUET and UGC NET favour matching and ordering questions; JAM and GATE a full numerical model with an answer you type in.
The Delhi School asks about a fifth of the questions here, and most of them are hard: IS–LM in letters, aggregate supply built from a labour market with a wage floor, wage- and price-setting, and open-economy models. The easy ones sit in the ordinary lessons; the rest wait in Lesson 10.
Real questions
Practise across lessons 1–9
Foundation
Definitions, directions of shifts and one-step problems. Most CUET, UGC NET and Hyderabad questions sit here.
83 questionsPractise →
Standard
Solving models, comparing slopes and multi-step reasoning, up to the hardest JNU, JAM and GATE questions.
233 questionsPractise →
Advanced
The Delhi School of Economics' harder questions, collected in Lesson 10.
74 questionsLesson 10 →
These are questions from the TestStop bank. A free account answers 10 a day, each with its worked solution; All-Access opens every set with no daily limit.
Read next
All resources →MacroeconomicsIS–LM 1: the demand for moneyThe quantity theory and velocity, the Cambridge k, Keynes's three motives, bond prices and the speculative motive, the liquidity trap, Baumol–Tobin and Friedman's restatement.MacroeconomicsMacroeconomics foundations, from zero to exam levelA module of lessons from "what does GDP measure" to the DSE's harder questions: national income, real and nominal GDP, the classical model and Keynes, the Keynesian cross and multipliers, consumption, investment and money, each with interactives and graded past-paper sets.MacroeconomicsIS–LM: fiscal and monetary shocksRaise government spending or the money supply and watch IS and LM shift, then see exactly how much gets crowded out.