In the master’s thesis, an analysis is conducted on the equilibrium in a simpler economy, where the three period model examines the impacts of variables on the equilibrium interest rate. The model is then extended by introducing prices, wages, and nominal interest rates, and the relationship between production and inflation is analyzed, which differs from that in the standard New Keynesian model. Financial nominal frictions are also introduced through wage rigidity, with the central bank having the ability to set inflation below the target. The influence of monetary and fiscal policies is analyzed, where, in liquidity trap conditions, monetary policy does not have the ability to eliminate the equilibrium state of secular stagnation, while fiscal policy does. Taxes, public debt, and public expenditures are modeled, and the model is expanded to a 56-period model with additional features calibrated to specific moments from the U.S. past. The model successfully generates permanently negative interest rates, and there exists a locally determined equilibrium state in secular stagnation. The paper concludes with a discussion of the implications of the secular stagnation hypothesis for further economic policy.