A Visual Model of Fiscal Policy

Martin Hiermeyer

MPRA Paper from University Library of Munich, Germany

Abstract: Undergraduate textbooks present the IS-LM model in a way that leaves open three questions. (1) How does the government fund a fiscal stimulus in the IS-LM model? (2) Given the unchanged money supply: What money do economic actors use to buy the extra output that a fiscal stimulus brings? (3) What is the appropriate money measure and interest rate for the IS-LM model? To help with those questions, the paper suggests a visual model of fiscal policy that can be seen as a long-form version of the IS-LM model – a long-form version that still contains answers to the three questions.

Keywords: Economic Education and Teaching of Economics; Fiscal Policy (search for similar items in EconPapers)
JEL-codes: A2 A22 E62 (search for similar items in EconPapers)
Date: 2023-01-25
New Economics Papers: this item is included in nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:116131

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