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The Twin Circuits: Aggregate Demand and the Expenditure Multiplier in a Monetary Economy

Author

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  • Thomas I. Palley

    (Public Policy Department, AFL-CIO, 815 Sixteenth Street, NW, Washington, D.C. 20006, tpalley@aflcio.org)

Abstract

This paper seeks to expand the theory of aggregate demand so as to take account of the monetary nature of exchange. The economy is represented in terms of twin circuits of income generation and financial asset transacting. Money is not extinguished when spent, but instead partakes in these twin circuits of exchange. Money embodies potential purchasing power, and the extent to which it generates spending in goods markets is affected by agents' liquidity preferences.

Suggested Citation

  • Thomas I. Palley, 1998. "The Twin Circuits: Aggregate Demand and the Expenditure Multiplier in a Monetary Economy," Review of Radical Political Economics, Union for Radical Political Economics, vol. 30(3), pages 91-101, September.
    • Handle: RePEc:sae:reorpe:v:30:y:1998:i:3:p:91-101
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    Cited by:

    1. Thomas I. Palley, 2019. "What's Wrong With Modern Money Theory (MMT): A Critical Primer," FMM Working Paper 44-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. Gechert, Sebastian, 2012. "The multiplier principle, credit-money and time," MPRA Paper 34648, University Library of Munich, Germany.
    3. Thomas Palley, 2023. "The theory of monetary disorder: debt finance, existing assets, and the consequences of prolonged ultra-easy policy," PSL Quarterly Review, Economia civile, vol. 76(307), pages 315-335.

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