| Abstract: | ![]()
A discrete-time model of a closed economy is employed in order to introduce the whole dynamics of stock adjustments in the IS-LM diagram. Discrete-time modeling allows us to represent the traverse process from the initial stationary state equilibrium to the new one by means of a family of intermediary IS(t) and LM(t) curves intersecting at each t to determine the appropriate short run equilibrium. Sufficient conditions for the dynamic process to be non-cyclical are derived under plausible assumptions. Two appendices provide the stability analysis and a numerical simulation of the model used. |
