|
S:
saving (S = -a + (1-b) (Y-T), where a and b are parametric)
T: taxes (modeled as a lump-sum tax) I: investment spending (Shifts of the curve can swamp movements along it.) G: government spending (a policy tool used to offset shifts in investment spending) Mtrans: transactions demand for money (in accordance with the equation of exchange) Mspec: speculative demand for money (based on expected movements in the interest rate) i: the interest rate (monetary phenomenon for Keynes; real phenomenon for the classicals) Y: income (which moves in lockstep with labor income and is a measure of output) |