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I am trying to build an IS/LM model with sliders for a few things including the slope of the IS curve. I am stuck getting the equilibrium ticks and dashed lines to properly follow the intersection of the two lines when the slope is changed. I have tried incorporating my variable i in as many ways as I can think of into the ticks and dashed lines, but continually come up short. I am a newbie at Mathematica and the code is confusing the hell out of me and making the basic math more confusing for me. Help!

Manipulate[
  Show[
    Plot[Tooltip[s + .8 *q, "LM"], {q, 0, 150}, 
      AxesOrigin -> {0, 0}, PlotStyle -> {Thick, Blue}, 
      AxesLabel -> {"GDP", "Interest Rate"}, 
      PlotRange -> {{0, 100}, {0, 100}}, PlotLabel -> IS LM, 
      Ticks -> {{{0.77*d - (0.77*s), "GDP"}}, {{d - i*(0.77*d - (0.77*s)), "r"}}}, 
      BaseStyle -> {FontWeight -> "Bold", FontSize -> 12}], 
    Plot[Tooltip[d - i*q, "IS"], {q, 0, 200}, 
      AxesOrigin -> {0, 0}, PlotStyle -> {Thick, Green}], 
    Graphics[{Dashed, 
      Line[{{0.77*d - (0.77*s), 0}, 
            {0.77*d - (0.77*s), d - i (0.77*d - 0.5 (0.77*s))}}]}], 
    Graphics[{Dashed, 
      Line[{{0, d - i (0.77*d - (0.77*s))}, 
            {0.77*d - (0.77*s), d - i (0.77*d - (0.77*s))}}]}]], 
  {{d, 75, "Fiscal Policy"}, 50, 100, 2},
  {{s, 0, "Monetary Policy"}, 0, 100, 2}, 
  {{i, .5, "Interest Sensitivity"}, 0, 5, .1}]
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  • $\begingroup$ Glancing at your code, it looks like you are converting a previous static example with specific values for each of d, s, and i to the Manipulate. I think that several of your values that are numerical need to be expressed in terms of your three variables. Specifically I would look at 0.8 (in Plot), the ubiquitous 0.77, and the 0.5 should be i (in first Dashed Line. If you fix those instances with the appropriate formulas, my guess is that most of your worries will be fixed. $\endgroup$
    – Andy Mobley
    Commented Mar 10, 2014 at 6:14
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    $\begingroup$ The second point in your first Dashed Line should be {0.77*d - (0.77*s), d - i (0.77*d - (0.77*s))} $\endgroup$
    – qwerty
    Commented Mar 10, 2014 at 6:43
  • $\begingroup$ After esprit's fix, you can figure out what the 0.77 should be in terms of formula by setting the IS=LM and then solving for the q that is the intersection of the two lines. You'll find that the ratio q/d at init cond is 0.77. From there you should be able to figure out how to calculate a value for 0.77 that depends upon your variable i and the 0.8 that is in the LM equation. Plug that expression everywhere there is a 0.77. I don't know what that 0.8 means in terms of economics, but it is my guess you will want to be able to vary it as well. Also, your two ranges for q are different. $\endgroup$
    – Andy Mobley
    Commented Mar 10, 2014 at 6:55

1 Answer 1

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I am uncertain if this is what you are after. A static baseline plot (reference) starting position I guess could be added. If the aim is simpler this may be helpful:

Manipulate[sol = q /. First@Solve[lm[s, q] == is[d, i, q], q];
 ysol = lm[s, sol];
 tcks = {{{sol, "GDP"}}, {{ysol, "r"}}};
 lns = {{Dashed, Line[{{sol, 0}, {sol, ysol}}]}, {Dashed, 
    Line[{{0, ysol}, {sol, ysol}}]}};
 Plot[{lm[s, q], is[d, i, q]}, {q, 0, 200}, Ticks -> tcks, 
  Epilog -> lns, PlotRange -> {0, 100}, 
  PlotStyle -> {{Thick, Blue}, {Thick, Green}}], {{d, 75, 
   "Fiscal Policy"}, 50, 100, 2}, {{s, 0, "Monetary Policy"}, 0, 100, 
  2}, {{i, .5, "Interest Sensitivity"}, 0, 5, .1}, 
 Initialization :> (lm[x_, y_] := x + .8*y;
   is[x_, y_, z_] := x - y*z)]

enter image description here

The tooltips and other style formatting can be adapted as desired.

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  • $\begingroup$ @ubpdqn I saw answers like yours, with animated GIFs, a lot the last few days. Have you, or is there a tutorial for creating these GIFs from Mathematica? $\endgroup$
    – Phab
    Commented Mar 11, 2014 at 10:13
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    $\begingroup$ @Phab Here are some useful resources (the first is free and makes life very easy): cockos.com/licecap and community.wolfram.com/groups/-/m/t/74556 and community.wolfram.com/groups/-/m/t/86994 (these were just easy to find links and there are similar links on Mathematica Stackexchange that you can search) $\endgroup$
    – ubpdqn
    Commented Mar 11, 2014 at 11:58

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