First-round “crowding out” in a generalized IS-LM model

A standard result of IS-LM analysis is that fiscal policy has no first-round effects on income if the LM curve is vertical. IS-LM models, however, are based on the restrictive assumption of a one commodity production technology. This paper relaxes this assumption and shows that complete, first-round crowding out is consistent with a negative interest elasticity of the demand for money.