8-PAC Economic Policy Apparatus – the Fundamentals

Our foundational analytic apparatus perpetuates the simple ISLM framework:

  • net investment (I)
  • must equal net saving (S)

  • and the demand for liquidity (L)

  • must be accommodated by the supply of money (M)

However, whereas Freidman disciples continue to believe that fiscal and monetary policy will attain market balance in the short-run; we believe that market balance is achieved only in the long run. And thus, government and central-bank policies are needed because the “long run” may be very long… taking into account rational expectations.

More to come.


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