The basic macroeconomic model with transaction money and investment money, with asset prices

The basic macroeconomic model is IS-LM, which describes the equilibrium of the goods market and the money market. In this basic model, monetary expansion drives down interest rates in the short term and drives up prices in the long term. To adapt it to contemporary economies, we at least have to divide money into transaction money (which is used to buy goods and services) and investment money (money is a component of wealth), to determine asset prices, and to introduce wealth effects. With this improved basic model, we look at the effects of expansionary fiscal and monetary policies in the short and long term. This gives us some very useful lessons for the analysis of economic policies implemented today.