Editing IS–LM model (section)

===AD-AS-like models with inflation instead of price levels=== 

In many modern textbooks, the traditional AD–AS diagram is replaced by a variation in which the variables are not output and the price level, but instead output and inflation (i.e., the change in the price level). In this case, the relation corresponding to the AS curve is normally derived from a [[Phillips curve]] relationship between inflation and the unemployment gap. As policymakers and economists are generally concerned about inflation levels and not actual price levels, this formulation is considered more appropriate. This variation is often referred to as a dynamic AD–AS model,<ref name=SWJ/><ref name=mankiw>{{cite book |last1=Mankiw |first1=Nicholas Gregory |title=Macroeconomics |date=2022 |publisher=Worth Publishers, Macmillan Learning |location=New York, NY |isbn=978-1-319-26390-4 |edition=Eleventh, international}}</ref> but may also have other names. Olivier Blanchard in his textbook uses the term IS–LM–PC model (PC standing for Phillips curve).<ref name=blanchard/> Others, among them Carlin and Soskice, refer to it as the "three-equation New Keynesian model",<ref name=Davis/> the three equations being an IS relation, often augmented with a term that allows for expectations influencing demand, a monetary policy (interest) rule and a short-run Phillips curve.<ref name=araujo/>