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A Visual Model of Fiscal Policy

Author

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  • Hiermeyer, Martin

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.

Suggested Citation

  • Hiermeyer, Martin, 2023. "A Visual Model of Fiscal Policy," MPRA Paper 116131, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:116131
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    More about this item

    Keywords

    Economic Education and Teaching of Economics; Fiscal Policy;

    JEL classification:

    • A2 - General Economics and Teaching - - Economic Education and Teaching of Economics
    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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