Fiscal Policy in Capital-Based Macroeconomics with Idle Resources.

While Roger Garrison's time structure of production model has been mostly used to theoretically and empirically analyze business cycles, other potential venues have not been explored. The effects of fiscal policy is one of these applications. We show how Garrison's model can be used to analyze the effects of fiscal policy in the presence of idle resources. This analysis yields two important results. Particularly, our application of Garrison's model shows that even if, starting with idle resources, fiscal policy manages to reach potential output, the result is imbalances in resource allocation in the economy's structure of production. [ABSTRACT FROM AUTHOR]