This article develops a new model of business cycles. The model is economical in that it is solved with an aggregate demand–aggregate supply diagram, and the effects of shocks and policies are obtained by comparative statics. The model builds on two unconventional assumptions. First, producers and consumers meet through a matching function. Thus, the model features unemployment, which fluctuates in response to aggregate demand and supply shocks. Secondly, wealth enters the utility function, so the model allows for permanent zero-lower-bound episodes. In the model, the optimal monetary policy is to set the interest rate at the level that eliminates the unemployment gap. This optimal interest rate is computed from the prevailing unemployment gap and monetary multiplier (the effect of the nominal interest rate on the unemployment rate). If the unemployment gap is exceedingly large, monetary policy cannot eliminate it before reaching the zero lower bound, but a wealth tax can.

中文翻译：

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经济的商业周期模型

本文开发了一种新的商业周期模型。该模型是经济的，因为它是用总需求-总供给图求解的，冲击和政策的影响是通过比较静态得到的。该模型建立在两个非常规假设之上。首先，生产者和消费者通过匹配功能相遇。因此，该模型以失业为特征，失业随总需求和供应冲击而波动。其次，财富进入效用函数，因此该模型允许永久零下限事件。在模型中，最优货币政策是将利率设定在消除失业缺口的水平。这个最佳利率是根据现行失业差距和货币乘数（名义利率对失业率的影响）计算得出的。