Internal Model of the Economy

My internal model of the economy is probably best captured by Marshall’s scissor model displaying aggregate demand and aggregate supply. In this model I think of quantity as determined by the function Y = C + I + G + (Ex – Im). If any of these quantities change – say consumption drops – then aggregate demand will shift. Price is also endogenous in this model and it can be understood in terms of the money supply. Demand for U.S. dollars for example, comes from both the U.S. and foreign markets.