Question

Fiscal policy is  the governments tax and spend policy. It is called discretionary fiscal policy because it is at the discretion of Congress. All money bills originate in the House of Representatives. The basis of fiscal policy is the GDP (Gross Domestic Product) model which is also known as the aggregate expenditures model----GDP=C+Ig+Xn+G.  This is supposed to measure the dollar amount of all goods and services produced in this country in one year. The C is consumer spending---that's you and me spending (71% of GDP). The Ig is gross private investment (14%) known better as simply gross investment. This is business investment. Together, C and Ig make up approximately 84% of GDP. This is why all Keynesian economic policies are based upon increasing demand for products and services (demand analysis). The GDP is dependent on consumer and business spending. So if you want the economy to boom, when you leave class take all the money you have on your person and spend it. Then use your debit card and wipe out your bank account and spend that money as well. Follow this by maxing out your credit cards and the economy will boom! Of course you will be destitute but you will have done your "fair" share to help others. That should give you a great feel-good attitude. Did I mention that this is the equation the government uses to control the economy.
Should the economy be run by a mathematical equation? why or why not?

Answer 1

Yes, because the sum of four variables in the equation namely consumption, investment, government expenditure, net exports affects the GDP of the country and also the price level and the employment level in the country. Higher the sum of the four components higher will be the employment level in the economy. Therefore, the government by using the fiscal policy changes the sum of components either to increase employment not to decrease price level.

But this is the one side of the coin i.e demand side. The another side of the coin is supply side which is not represented by this equation.