The finance-investment and saving-funding circuit in the closed and open economies with government

Abstract

This contribution discusses the Finance-Investment and Saving-Funding (FISF) circuit regarding the closed and open economies with government. Moreover, we discuss the fiscal policy effects on aggregate demand and income in the FISF circuit context. Keynes explained the FISF circuit assuming a closed economy without government. The novelty of the current contribution is to analyze the above-mentioned circuit in the closed and open economy context including government. We show that the basic features of the FISF circuit remain unchanged for the closed and open economies when government is considered in the circuit.