In Modern Monetary Theory (MMT), a distinction is made between ‘vertical’ and ‘horizontal’ transactions. The former refer to transactions between government and non-government; the latter to transactions within non-government. I thought it might be helpful to clarify the significance of … Continue reading
As a preliminary exercise, it may be instructive to modify the familiar Keynesian cross diagram to include the effects of a job guarantee within a simple short-run framework. The diagram includes two key schedules. The first is a 45-degree line … Continue reading
Modern Monetary Theory (MMT) offers an understanding of sovereign (and non-sovereign) currencies that is applicable to a wide range of economic systems, including capitalist and socialist ones. Irrespective of the personal political preferences of its proponents, the theoretical framework in … Continue reading
A job guarantee would be a standing offer of a publicly funded job, with spending on the program adjusting automatically and countercyclically in response to take-up of positions. The likely feedback between spending on the program and activity in general … Continue reading
Theoretical studies of output and growth often focus on the behavior of equilibrium output. The usefulness of this approach depends on there being a tendency for actual output to converge on equilibrium output. With such a tendency present, studying the … Continue reading
It is easy to represent the ‘income-expenditure model’ in a graph. Some people find this helpful as a visual aid to understanding; others, not so much. For those who find graphs confusing, this post can safely be ignored. In terms … Continue reading
In the long run, a higher rate of economic growth implies a higher share of investment in income. This will necessarily correspond to a lower combined share of other forms of spending. Knowledge of this point sometimes leads to unfortunate … Continue reading
A currency-issuing government is not revenue constrained. It is always able to purchase whatever is available for sale in its own currency. This simple reality is partially concealed by a variety of contrived hoops through which modern day governments require … Continue reading
A recent post introduced the income-expenditure model, a staple of introductory courses in macroeconomics. In this post, a closely related model of the sectoral financial balances is considered at a similarly introductory level. The ‘sectoral financial balances model’, or ‘SFB … Continue reading
This is a follow-up to a recent post on the income-expenditure (IE) model and is at a similar introductory level. Some knowledge from the previous post is assumed, so for those unfamiliar with the model, it would be best to … Continue reading
