The Effectiveness of Aggregate Demand Management Policy

Hideaki Tamura

Chapter Chapter 6 in Human Psychology and Economic Fluctuation, 2006, pp 125-134 from Palgrave Macmillan

Abstract: Abstract In this chapter we use the “loanable funds theory” of classical macro-economic theory (discussed in Section 2.1 of Chapter 4) to analyze the mechanism by which aggregate demand management policy (monetary and fiscal policy) can alter households’ monetary utility attrition rates and thereby have an impact on various economic variables, and then show that it is possible to construct a model in which changes to utility attrition rates cause the money market and real markets to interact. In order to simplify our analysis, we omit any discussion of cash hoarding by households and firms or “induced investment” that depends on income or production.

Keywords: Fiscal Policy; Money Supply; Real Interest Rate; Aggregate Demand; Market Interest Rate (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-50563-6_7

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DOI: 10.1057/9780230505636_7

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