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The IS-LM model is an economic framework that illustrates the relationship between the goods market (Investment-Savings or IS curve) and the money market (Liquidity preference-Money supply or LM curve). The IS curve represents equilibrium in the goods market where total output (GDP) equals total spending, while the LM curve shows equilibrium in the money market where money supply equals money demand. Together, these curves help analyze the effects of fiscal and monetary policy on interest rates and economic output. The model is particularly useful for understanding short-term economic fluctuations.

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