Wednesday, February 12, 2020

Bill Mitchell — GDP is a flow and is the sum of the all expenditure flows over a given period

I have two days of teaching left in Helsinki and my next stop on Friday is Dublin where I will be discussing unification and exit. Should be a fun topic. Its Wednesday back home already and today I consider a matter that came up in one of my classes that I am taking in macroeconomics at the moment at the University of Helsinki. Students really struggle when first introduced to the idea of a stock and a flow. They can easily be led into defining a flow as a stock. Getting this absolutely right is one of the key building blocks in understanding basic macroeconomics and the links between the expenditure system and financial accumulation. Modern Monetary Theory (MMT) builds heavily on the difference between stocks and flows and is also what we call stock-flow consistent. So all flows that inform stocks are accounted for in a consistent way. So, for example, we know that when households save, which is the residual of disposable income that is not consumed and a flow, this accumulates into a stock of financial wealth. Today, I am seeking to clarify the issue in my class that we did not have sufficient time to deal with in detail last week. And after that, some music to restore sanity....
Bill Mitchell – billy blog
GDP is a flow and is the sum of the all expenditure flows over a given period
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

5 comments:

Matt Franko said...

"Today, I am seeking to clarify the issue in my class that we did not have sufficient time to deal with in detail last week. "

Why not tell them to just take 30 weeks of Calculus their Freshman year and then you won't have to do this? Or just go back and take 30 weeks if they have already graduated...

Matt Franko said...

If Bill thinks he is going to overcome this ignorance in this audience with a few magic words from him he's misguided...

It requires training..

S400 said...

If Matt thinks he is going to overcome his own ignorance by posting simpleton thoughts he's not only misguided...

Matt Franko said...

S, I get it... youre dumb... you never had Math past the 8th grade... ok I get it...

S400 said...

Nope you don’t get it.