This application simulates the goods market of a closed economy with autonomous taxes (i.e. taxes that are independent of the economy’s income). It can be used by instructors to support teaching the model and by students to explore how the model reacts to parameter changes and how the adaptation to a new equilibrium proceeds.
Depending on how deeply the underlying mathematical model is explained the simultation is suitable for principles, undergraduate, as well as for graduate study levels.
The user can change the parameters of the consumption function and the investment function as well as the autonomous taxes and government expenditures. The diagram will show the effects on the IS-Curve.
After a exogenous shock has moved the IS-Curve the user can successively increase Income to show the dynamics adjustment process to a new equilibrium and to model the multiplier of the goods market.