Dynamic Keynesian Economic Systems: Control and Identification

Abstract

An isolated economic system, for example a national economy, is described in the terminology of John Maynard Keynes [2] by the aggregate income Y, the income arising from the production of consumer goods and services C, and the production of investment goods I. We consider the effects on the economy of the external economic forces of government expenditures G, tax rate T_x, and basic interest rate r. In economic terminology Y, C, and I are the endogenous variables and G, T_x, and r are the exogenous variables, [1, 3]. In engineering control theory notation Y, C, and I describe the state of the system and G, T_x, and r are the controllers. Other controlling economic factors such as government transfers and pensions, international trade, and psychological motivations will be ignored here.