The IS-LM model is a convenient means of analysing the effect of exogenous changes in key economic variables (interest rate, government expenditure, private consumption, etc.) on equilibrium in both the product and the money markets.

Explain this statement (13 marks) and use it to analyse the massive increase in government spending in the United States of America in the wake of the COVID-19 pandemic (12 marks). Use a diagram to illustrate your answers.