After the reserve interest rate is raised, the real money supply decreases, which in turn leads to an increase in interest rates and a decrease in output. IS curve moves down! Similarly, the reserve interest rate drops, the output increases, and the interest rate rises! The IS curve moves up.

Draw a diagram of IS-LM, and explain it directly as follows: The rediscount rate is the withholding rate when a commercial bank applies to the central bank for rediscount of its discounted unexpired bills. Re-discussion refers to commercial banks lending to the central bank, thereby increasing the money supply and directly increasing the money supply.

The reduction of rediscount rate by the central bank will reduce the interest rate of commercial banks borrowing from the central bank, which is an expansionary monetary policy and will lead to the increase of market currency, investment and interest rate.

Extended data:

In the product market, national income depends on the total expenditure or total demand level of consumption, investment, government expenditure and net export, while total demand, especially investment demand, is affected by interest rate, which is determined by the supply and demand of money market, that is, the money market will affect the product market;

On the other hand, the national income determined by the product market will affect the money demand, thus affecting the interest rate, which is the influence of the product market on the money market. It can be seen that the product market and the money market are interrelated and interactive, and the income and interest rate can only be determined in this connection and interaction.

It is called IS-LM to describe and analyze the theoretical structure of these two markets.

Baidu Encyclopedia -IS-LM Analysis