ABSTRACT
This chapter introduces the agents, and includes a central bank and the government. It derives the steady state equilibrium conditions and analyses various variations of parameters. The chapter discusses the effects of expansionary monetary and fiscal policies on interest rates and total outputs then, summarizes and concludes. Bhm-Bawerks theory, not only flows but also stocks play a role in the explanation of the interest rate, as has already been demanded by Tobin. Private households also hold liquidity in the form of paper money. In contrast, post-Keynesian economists see money neither as a simply argument of the individuals utility function nor as a purely means of exchange but as a crucial part of the economy. Concerning the central bank, author limits our analysis to open market policy. Concerning an increase in public debt, simulations suggest that it generally results in an increasing interest rate and, hence, in a decline in both capital supply and total output.
