Monetary and Fiscal Policy in One Macroeconoic Model

On this paper we are going to study the monetary and fiscal policy in macroeconomic IS-LM analysis. In a traditional IS-LM analysis the price level was regarded as an economic parameter and the rate of interest was regarded as an endogeneous economic variable. But in an actual economy the price level seems to have a nature of an endogeneous economic variable and the rate of interest seems to have a nature of an economic parameter. Therefore on this paper we are going to regard the price level as an endogeneous economic variable and the rate of interest as an economic parameter. Then the purpose of this paper is to study the effects of monetary and fiscal policy in our macroeconomic model. In section 1 we are going to discuss the equilibrium national income and the price level in the product and money market. In section 2 the stability conditon of our model will be considered. In section 3 we will study the effects of monetary and fiscal policy of our macroeconomic model. The last section will be the concluding remarks.