Mundell's models allowed a significant role for fiscal policy, especially under fixed exchange rates. However, the treatment was entirely Keynesian-an increased budget deficit operated solely by raising the aggregate demand for goods. Moreover, increases in government spending and cuts in taxes had pretty much the same effect on the economy. (Robert Barro)

Mundell's models allowed a significant role for fiscal policy, especially under fixed exchange rates. However, the treatment was entirely Keynesian-an increased budget deficit operated solely by raising the aggregate demand for goods. Moreover, increases in government spending and cuts in taxes had pretty much the same effect on the economy.

Robert Barro

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aggregate budget deficit demand economy effect exchange fiscal goods government policy pretty raising role significant spending tax treatment under cuts rates

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