Demand and supply of money, IS-LM model

The IS-LM model puts the goods market and the money market in one picture. The IS curve joins interest rates and output levels where planned spending equals output: higher interest rates discourage investment, so IS slopes down. The LM curve joins combinations where money demand equals money supply: higher output raises money demand, so the interest rate must rise to keep the money market in balance, and LM slopes up. Worked example: with C = 100 + 0.8Y, I = 200 - 10r and G = 100, the IS curve is Y = 2000 - 50r; with real money supply 500 and money demand 0.5Y - 20r, the LM curve is Y = 1000 + 40r; together they give r = 11.11 and Y = 1444.