Monday, November 25, 2013

Peter Cooper — Planned Investment/Saving and Keynesian Causation

This is intended as an introductory post to explain the Keynesian (and Kaleckian) view of causation between planned investment and planned saving in particular, and planned injections and planned leakages in general. Initially, the argument is presented with reference to a simple two-sector income-expenditure model of a pure private economy. The model illustrates the Keynesian view that provided the economy is operating below full employment and there is idle capacity, planned investment generates planned saving via income adjustments rather than being financed by that saving. The second part of the post employs a four-sector model with government and external sectors included to draw out a couple of points emphasized by modern monetary theorists.
Planned Investment/Saving and Keynesian Causation
Peter Cooper

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