Sunday, July 31, 2011

Debt Limit - Macroeconomic Reason For Its Increase Using IS LM Model

This is a vlog unlike any other I've made before. The idea is to use a long-standing economic model called "IS / LM" to explain why the debt limit must be increased by August 2nd. The IS / LM curve was created in 1937 by Sir John Hicks, and has stood the test of time. Why? Because it's held up under a number of data tests.

IS is the name of a curve that represents all forms of macro spending, from government spending to taxes and overall weath. LM is the curve for the supply of money. All I do here is explain a "known" fact - that capping the debt ceiling will cause a decrease in money supply, causing an increase in interest rates, and a drop in overall national income.

But I then explain how that's related to government spending, and why "G" is important. If you disagree with my presentation, make a video of your own using the IS LM Model,and explain why.