target-instrument model

The "target-instrument" model in economics, developed by economists like Jan Tinbergen, is a framework for government intervention to achieve specific economic goals. This approach assumes that the government can regulate both demand and supply to meet targets such as full employment or a desired growth rate.1

Economists provide forecasts based on models of the economy, which then inform policymakers. If forecasts indicate undesirable outcomes like high unemployment or low growth, the government can implement countermeasures. For instance, tax cuts might stimulate investment, or reduced government spending could curb inflation. These models don't fit neatly into demand-determined or supply-determined categories, as the fiscal authorities effectively control both.1