Rethinking the Theory of Money, Credit, and Macroeconomics by Smithin John N.;

Author:Smithin, John N.;
Language: eng
Format: epub
ISBN: 9781498542821
Publisher: Rowman & Littlefield Publishing

Figure 6.3 Distribution of Income between Wages, Interest, and Profit. Source: Author.

Taking a cue from Keynesian economics, the actual level of employment is determined by a demand constraint—depicted here as a vertical line. As simple as this diagram is, it immediately answers the original question about the relation between interest and profit. If there is an increase in real interest rates this will cut into the profit share, and vice versa.

Meanwhile an increase in aggregate demand itself (a relaxation of the demand constraint) increases output and employment in an essentially Keynesian manner. In Figure 6.4, we note that output and employment are indeed increased as a result of an increase in effective demand. However, because the income shares are pre-determined by assumption, there is no change in the distribution of income between interest, profit, and wages.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.