What is the IS-LM model?

The IS-LM model is the Investment-Savings Liquidity Preference-Money Supply model. It displays equilibrium in the macro-economy when the two curves, IS & LM, intersect.LM Curve: Displays all the possible combinations of equilibrium between the liquidity preference and money supply at a given interest rate and output. Liquidity preference is an individual's desire to hold their money in cash (rather than as savings, investment, etc.). Money Supply is the quantity of money supplied by the central bank in circulation at that point in time.Every point on the LM curve is a point at which L=M, i.e. when the money supply is equal to aggregate individual preferences for the given supply of money.Upward sloping -- as output rises, there is higher demand for money as the economy expands.IS Curve: Displays all the possible combinations of equilibrium between the level of investment and savings at a given interest rate and output.Investment is money put into bonds, businesses, shares, houses bought, etc.Savings is anything (i.e. income) not spent (most often gaining interest).Every point on the IS curve demonstrates equilibrium when I=S.Downward sloping -- Lower levels of interest discourage savings, thus encouraging more investment, increasing output.